Your 1031 Team

There are a number of different resources the investor needs to successfully complete a 1031 exchange.  As discussed in prior articles the first step to a successful stress free exchange is developing investment objectives adjusted for risk.  Following, are the professionals who the investor needs to have on their team before launching the sale of the property they are going to relinquish.

Just remember a well planned 1031 exchange is a thing of beauty while one that is unplanned invites financial and emotional hardship.

The key players in a 1031 exchange are as follows:

An Accountant

The investor should make sure their accountant has experience doing 1031 exchanges or find one that does.  The accountant is a vital player in providing the investor with information as to the tax consequences of a 1031 exchange and should be able to advise the investor on the desirability of a 1031 exchange for both financial and personal reasons.

A Qualified Intermediary

The IRS requires that the owner of the property to be relinquished (the exchanger) not be permitted to have control of the proceeds from the sale of their property (aka "constructive receipt").  It is necessary that a Qualified Intermediary (QI) or a similarly qualified party, hold the proceeds and perform the following tasks:

• Acquires the relinquished property from the taxpayer;
• Transfers the relinquished property;
• Acquires the replacement property;
• Transfers the replacement property to the taxpayer.

Real Estate Legal Counsel

The investor should make sure their legal counsel has experience doing 1031 exchanges or find one that does, in the state(s) the relinquished and replacement property(s) are located.  Legal counsel is used to review contracts to make sure the investor's interests are properly served.

Real Estate and 1031 Exchange Strategy Experts

To successfully complete a 1031 exchange it is vital that the investor have a clear road map as to both the types of investments they are going into and how to traverse the various stages of a 1031 exchange.

Finding Replacement Property

Keys characteristics of a good replacement property are certainty of close (the investor can not afford to have the purchase of their replacement property unravel after the 45 day identification period ends), transparency (the investor needs to be able to quickly determine the risk and potential reward in any property without going through prolonged due diligence).  Also vital to a successful exchange is a consistent, dependable flow of available investment opportunities with a range of risk reward opportunities appropriate for the investor's needs.