is this a reverse 1031

[Robert High]

I'm selling a multifamily that is expected to close around March 15.  Already found a property I'd like to buy with my 1031 proceeds. If seller of the replacement property accepts my offer now (contingent on the closing of my multifamily), is this a reverse 1031?  How do I structure this transaction properly?

[Lauren Speidel]

@John Warren Thanks for the mention!

@Robert High No, if you sign a contract and have a contingency, it is not a Reverse 1031. A Reverse 1031 is when you purchase (close on) the Replacement property first and then you have 180 calendar days to sell your Relinquished property. Signing a contract will not start your Exchange period. If you do get into a situation where you need to purchase your Replacement property first, then you may consider a Reverse 1031 Exchange. The most common structure involves, the QI creating an LLC and then they purchase the Replacement on your behalf while you attempt to sell your current property. So be aware that you can't just purchase it now and decide later you want to include it in a 1031. You can't own both properties at the same time which is why the QI parks title to the Replacement property. Reverse 1031 Exchange have a number of complexities and hurdles which is why it would be important to be aware of the structure before going down that road.