What Is A 1031 Improvement Exchange?

An improvement exchange, also known as a construction or build-to-suit exchange, permits an investor to make improvements on a new replacement property using equity from the exchange. This type of exchange requires the use of a qualified intermediary.

This type of exchange allows an investor acquire a replacement property specifically suited to his or her investment needs, rather than settle for whatever happens to be on the market at the time of the exchange. The investor can refurbish, add capital improvements or build a brand new property from the ground up.

An improvement exchange also gives the investor more time for the exchange. This is possible because the new replacement property does not have to be fully completed within the 180 day exchange period, as no occupancy permit is required to qualify for the exchange.

The requirements for an improvement exchange, include:

1. The investor must spend all the exchange equity on completed renovations or down payment by the 180th day.
2. The investor must receive substantially the same property they identified by the 45th day.
3. The replacement property must be of equal or greater value at the time of transfer to the investor.

The final value of the replacement property is calculated by combining the original purchase price plus the total of all capital improvements in place before the investor takes title to the property.

To learn more about 1031 exchanges orour qualified intermediary and replacement property locator services, please visit ourwebsite.