Qualified intermediary, 1031 exchange

Buying & Selling Real Estate
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Qualified intermediary, 1031 exchange

Lauren GomezPro Member
Rental Property Investor · Pueblo, CO · Member since 2019 · 11 posts · 3 votes

Hello all! Does anyone have any recommendations for a qualified intermediary for a 1031 exchange? I am located in the Pueblo, CO area. Side questions: Is it beneficial to go with someone local? or does that matter? Could I use a national company? What should I look out for? Thanks for any info you might have!

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Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
5y

I think @Dave Foster can answer most of your questions. It doesn't need to be someone local to complete a 1031 exchange. 

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  • Jaron WallingPro Member
    Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
    5y

    I think @Dave Foster can answer most of your questions. It doesn't need to be someone local to complete a 1031 exchange. 

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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Lauren Gomez, Your QI doesn't need to be local to you at all.  1031 is a federal statute so it is the same in all states.  And so many times exchanges are started in one state and end in another that good QIs are prepared to assist you wherever.  

    What is more important is that the QI you select is large enough to have significant experience and economies of scale.  Yet small enough to be responsive and give you access to senior consultants who understand the law when you need.  Kind of a Goldilocks situation.  Not too big, not too small - Just right!

    Even a local title company is not using a local intermediary in 99% of cases.  They will either use someone like us that they've developed a relationship with.  Or they'll have what is called a "captive QI" who is owned by the title underwriter and they have to recommend whether or not they like them.

    There are a number of good QIs right here on BP.  You can search them out.  One added bonus is that on the profile of the QI here at BP you can go to the references section and actually talk to real clients of them to see how their experience was.

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  • Lauren GomezPro Member
    OP
    Rental Property Investor · Pueblo, CO · Member since 2019 · 11 posts · 3 votes
    5y

    Thanks for your reply and information! I have hit a snag in my research. The property I want to relinquish is in the name of my partnership. I know one of the rules is that the same tax payer has to sell and buy for the 1031 to work. I am having a hard time 1) knowing if my entity is a disregarded entity or not, so that I might buy in my own name (mixed messages from my CPA). 2) finding someone that might lend to my entity.  I have searched through forums and I keep reading, just ask a different lender. Am I asking lenders the wrong questions? How could I confirm if I need to buy in the name of my entity or not?

    Thanks again for any iformation!

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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Lauren Gomez, The easiest test for who is the exchangor is to find the tax return that reports the activity of the real estate.  A disregarded entity will not file a tax return.  All activity of the property is reported on your personal tax return Schedule E usually.  If the entity that is on title to the property files a tax return and you are an owner of that entity then you get a K1 or partnership return for the company.  But the activity of the property is reported on the entities return.  

    The nature of your partnership is key.  Is this a registered partnership that files a tax return?  Then the partnership is the taxpayer of the real estate and it must sell and perform the 1031.

    Is the partnership really you and someone else or some other people who got together to buy a property and you own it as tenants in common?  Then each of you own a piece of real estate that happens to be a % of a larger piece of real estate.  You report the activity of the real estate on your personal tax return.  So you are the tax payer.  You must sell and do the 1031.

    It shouldn't be difficult for your CPA.  What tax return reports the property's activity?  That is the tax payer and who must do the 1031.

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  • Lauren GomezPro Member
    OP
    Rental Property Investor · Pueblo, CO · Member since 2019 · 11 posts · 3 votes
    5y

    @Dave Foster, Thank you for your quick response! You have been most helpful! I watched your videos also! Thanks so much for all the info. I believe it is a registered partnership, it has an EIN number, it is my husband and I. I will need to look if there is a schedule E. I do have a K1 form. My other issue is finding lenders that will lend to my partnership. I don't know if things have tightened up due to covid or I'm just not asking for the right product. If anyone has any tips or tricks to finding a lender for this, that would be great!

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