Why Would You Use a Reverse Exchange?
Real estate investors who are able to move quickly can take advantage of those who are losing their properties through distressed asset sales by means of what is known as a Reverse 1031 Exchange. A Reverse 1031 Exchange is when the Investor must acquire their like-kind replacement property BEFORE the sale of their relinquished property; reasons for doing so include avoidance of 1031 exchange deadlines (since the Investor is acquiring their like-kind replacement property first, such deadlines do not apply) and the discovery by the Investor of a property opportunity that they want to close on that leaves them little time to sell relinquished property beforehand. Many investors utilize the reverse exchange strategy for the flexibility they offer when setting up the buying and selling of real estate.
A reverse exchange also minimizes the risk to the Investor in a number of ways. By acquiring the like-kind replacement property at the beginning of the transaction instead of the end, the Investor has additional time to identify which relinquished property they want to sell - 45 days in total – as well as 135 additional calendar days on top of that (for 180 days in total) to compete the sale. And even that deadline holds little meaning in a reverse exchange, because if the Investor’s relinquished property has not been sold within the 180 days there are no income tax consequences; instead, the Investor would own both properties in question. Reverse Exchanges give an Investor a tremendous amount of control over their 1031 Exchange, so much so that some Investors use them exclusively in all real estate transactions.
Disclaimer: 1031 exchange made simple does not guarantee the performance of the QI's in our referral network and we can not be held liable for any misrepresentations or mistakes in regards to a 1031 exchange by one of the QI's that we refer to you. 1031 Exchange made simple does not provide tax advice nor can we make representations regarding the tax consequences of an exchange transaction. 1031 Exchange made simple is a 1031 QI Referral Network. 1031 made simple is not responsible (in any way) for the performance, creditability, and financial condition of any QI in our network. In this new economic environment it is imperative that all potential 1031 exchange customers do their own due diligence and research on any QI that they may use, on a 1031 exchange. Please verify and check the validity of the Bonding and Insurance of your QI. It may be wise to have your 1031 exchange accounts set up as separate, individual customer accounts. Our web site is to be used as a information based web site only. All parties doing a 1031 exchange must consult their tax advisors or attorney for this information.
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