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1031 Exchange

Looking for a fast, flexible financing option for your 1031 Exchange scenario?

A 1031 exchange is a transaction that allows real estate investors to defer capital gains taxes by using the sale proceeds to purchase another investment property. Intrust Funding offers loans specifically for investors seeking to complete a 1031 exchange.

With fast closing times and flexible loan options, we help investors secure their replacement property and complete their exchange within IRS timelines. Our draw process requires no inspections for quick and efficient completion, and our experienced team provides guidance and support throughout the exchange process.

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1031 Exchange – James Dainard

1031 Exchange – Rules

Like-Kind Properties

To qualify for a 1031 exchange, the property you sell and the property you purchase must both be “like-kind” properties. In other words, they must be similar in nature, character, or class. For real estate investors, this means that you can exchange one investment property for another, but you cannot exchange a property you use for personal purposes, such as a primary residence.

Timelines

There are strict timelines that must be followed in a 1031 exchange. Once you sell your property, you have 45 days to identify a replacement property and 180 days to complete the purchase. These timelines are set in stone and cannot be extended, so it’s important to act quickly and work with a qualified real estate agent or 1031 exchange intermediary to ensure that you meet the deadlines.

Qualified Intermediary

To complete a 1031 exchange, you must work with a qualified intermediary, also known as an accommodator. The intermediary holds the funds from the sale of your property and uses them to purchase the replacement property on your behalf. This helps ensure that you do not have actual or constructive receipt of the funds, which could disqualify the exchange.

Equal or Greater Value

The replacement property you purchase must be of equal or greater value than the property you sold. This means that you cannot take any cash or other property out of the exchange without incurring a tax liability.

1031 Exchange Example

A real estate investor in Washington state owns a rental property that they purchased several years ago for $300,000. The property has appreciated in value, and the investor is now looking to sell it for $500,000. However, they don’t want to pay the capital gains taxes that would be owed on the sale, which would be around $40,000.

To avoid the tax liability, the investor decides to use a 1031 exchange to purchase a new investment property. They identify a property that they would like to purchase for $600,000 and begin the exchange process.

However, the investor doesn’t have the full $600,000 available to purchase the replacement property. They decide to work with a hard money lender, such as Intrust Funding, to secure a loan for the remaining amount.

Intrust Funding is able to provide a loan for $400,000, which allows the investor to complete the purchase of the replacement property.

Thanks to the 1031 exchange and the hard money loan, the investor is able to defer the capital gains taxes on the sale of their original property and reinvest the funds in a new property. They can continue to grow their real estate portfolio without incurring a significant tax burden.

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