How son can I buy for a 1031 exchange

Question

Hi,

Here is the situation:

- I am planning to sell a property that will go on the market May 15th.

- It will close around June 15th.

- I want to do a 1031 exchange and buy 2 or 3 properties

From what time can I buy the properties? If I have an accepted offer April 15th and for some reasons my property to sell is delayed to July for example, can I still have the first property qualify for a 1031?

Thank you!

Leslie Pappas · Answer

Hi @Matt Smith, if you're an accredited investor who is seeking to defer your capital gains tax but doesn’t want to be a landlord anymore you might consider reinvestment into DSTs (Delaware Statutory Trusts). They are hands-off, institutional grade real estate investments, and they allow you the option to diversify. You can buy into institutional grade $50-125M projects with as little as $100,000. Professionals with decades of experience and very impressive track records do all the heavy lifting for you. You get potential cash flow, tax shelter and appreciation. Loans are non-recourse.

Dave Foster · Answer

@Matt Smith, You can go into contract for your replacements before you close your sale.  But you cannot close on your replacements until after you close your sale.  You can do them one minute apart at the same closing table but the sale must close first.

In your case you may want to get a contingency on your purchases for a delayed closing if your sale lags.  You could couple it with some additional earnest money to reassure the seller.

Another option is a reverse exchange where we as your QI set up a holding entity called the Exchange Accommodating Title Holder (EAT) and it takes title to your new property and holds it until your old property sells.  But this is an expensive and more complicated process than a simple straight exchange.  It may not make sense economically if your gain isn't that large.