1031 exchange into construction loan?

1 Reply

BP Community, I'm looking to sell a SFH rental in Florida and 1031 exchange it into a pre-construction duplex with a construction loan. Any advice on if this is possible and what the timing of events need to be? I could sell in the next 30-days and close on the construction loan around the same time. Wondering, does it matter the order if I sell first or close on the loan first? Construction will take about 6-months. Appreciate the guidance! - Mike

@Michael Kehoe In order to successfully complete an Improvement/Build-to-Suit exchange all construction needs to be completed within the 180 days. You will need to hire a third party to document how much has actually been constructed. I would recommend as much documentation as possible (photos, videos, notes, etc.). You would need to not only enlist the help of a Qualified Intermediary but also set up an arrangement with an Exchange Accommodation Titleholder (EAT) and they will hold title to your new property while construction is completed. Some QIs have the ability to act as both. Therefore, if you obtain a construction loan it would have to be in the name of the EAT which is usually an LLC structure. There are other agreements that must be in place prior to moving forward and as you can see they can get pretty complicated. You will want to choose a QI that has the experience to safely handle the transaction.

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