Types of 1031 Exchanges

Robert 'Rusty' Tweed

June 14, 2022

 

 

 

Rusty Tweed believes that, among the most common forms of exchanges are Building-to-suit, Restaurant, and Duplex properties. However, there are other types of exchanges, too. Read on to learn more about them. 1031 exchanges can help investors diversify their portfolio, improve their estimated returns, and purchase property already managed. But completing a 1031 exchange is not always as easy as it seems. To make the process as painless as possible, here are some tips.

Building-to-suit exchanges

A Build-to-Suit exchange allows you to purchase a property of lower value and then use the proceeds from the exchange to build a new, specialized property. A build-to-suit exchange allows you to defer tax liability on the gain, which helps finance the purchase of a new property. Moreover, you can use your exchange funds for renovations or construction. Here are some of the benefits of Build-to-Suit exchanges:

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Before you start your build-to-Suit exchange, you must decide whether to borrow or use a loan. Since EAT will take title to the replacement property, you must borrow funds from a lender or investor. You have 180 days to complete the exchange. You can use the funds for construction until the 180-day period has passed. A build-to-Suit exchange is more expensive than a regular deferred exchange, because EAT will take title to the new property. Additionally, you may have to pay escrow fees twice, transfer taxes twice, and more.

Duplex exchanges by Rusty Tweed

As with any exchange, the 1031 rule must be followed. In order to be eligible for the tax advantages of a 1031 exchange, you must swap one property for another of like kind. However, there is very little chance that a property will be swapped. Thus, the vast majority of 1031 exchanges are delayed exchanges, otherwise known as three-party exchanges. In a delayed exchange, a qualified intermediary holds the cash you receive from the sale of your old property and uses it to purchase the new property. The intermediary should not be a family member, broker, or agent.

As a general rule, to qualify for a 1031 exchange, you must own a property in the U.S. that is “of like kind.” Although the exchange doesn’t have to involve the same type of property as the relinquished property, it must be of similar value. Both properties must be U.S. real estate. The exchange must be for like-kind property. Duplex exchanges are a good choice for a new home if you are planning to move within a few years.

Apartment building exchanges

Real estate investors who want to defer their taxes and benefit from deferring capital gains may wish to learn about the 1031 exchange. This type of real estate exchange allows investors to exchange two like-kind properties while avoiding the need to pay capital gains taxes. The program allows real estate investors to utilize government funds to purchase real estate, and the benefits are obvious: you can use the funds to buy more real estate and avoid paying taxes later.

A 1031 exchange must be completed by a qualified intermediary, and all properties must be like-kind. In Southern California, a 1031 exchange is easier than ever thanks to a plethora of apartments for sale. An intermediary, such as Apartment Advisors INC., can help you complete the process quickly and easily. With their help, you’ll be on your way to achieving your 1031 exchange in no time.

Restaurant exchanges by Rusty Tweed

The concept of restaurant exchanges was first conceived two years before the first Exchange Buffet. This concept renamed itself a “conscience joint,” which meant that customers kept their own tabs and paid according to what they ate. A restaurant that adopted this style was the first of its kind. However, the current Restaurant Exchanges concept has some differences.

The original Exchange Buffet opened in September 1885. This establishment aimed at male employees in the financial district. Employees could also become stockholders and vote for their preferred menu items. In addition to this, Exchange Buffet also introduced table service. Its success helped to promote a sense of accountability among customers. Ultimately, the concept of a “food exchange” has become an integral part of many New York City businesses.