How to Make Your 1031 Exchange Smooth and Successful

For many real estate investors, doing a 1031 exchange can be stressful. It also puts a lot of pressure on their shoulders, as they have to think about buying a new property within 45 days of the closing date of their sold property. Here, and other experts discuss what you need to take note of. This way, you can make sure that the process goes smoothly and successfully.

Sign the Documents

When doing a 1031 exchange, you have to make sure that you have closed the deal right away. Doing a 1031 exchange means you will sell your relinquished property to an interested buyer in exchange for a replacement property from a different seller.

To make all of that possible, you have to sign some exchange documents on or before the date you close the sale of your relinquished property. Some of the documents included are the 1031 exchange agreement, assignment agreement, notice of assignment, and qualified exchange account agreement.

Safety First

One of the risks of doing an exchange is that your funds will be held by the intermediary until you decide to use it to get a replacement property. To be on the safe side, make sure you know how those funds are being held. Ask the intermediary if the funds will be held in a separate account identified by the name and tax ID number of the investor. You should also make sure if it’s held in an FDIC-insured bank account or invested in securities.

Lastly, ask the intermediary if they’re financially strong and reputable. Never hold back in asking these questions, as these will protect you in case something happens to the funds.

The Costs and Expenses

Of course, you have to shell out some money when doing a 1031 exchange. Here are some things you have to think about: brokerage commissions, escrow fees, exchange fees, and transfer taxes. You should be ready to pay for these if you don’t want to pay the taxes involved in a 1031 exchange.

If you need some guidance regarding the exchange, you can hire a company to help you out. This will make the exchange safer and more convenient and will make you a hundred percent successful with it.