Structure of 1031 exchange

1031 Simultaneous Exchange:
The like-kind replacement property and sold property both close concurrently in simultaneous 1031 exchange.

Delayed or Forward 1031 exchange:
You have to give away your present property first and then close the deal on your like-kind property that you are getting in exchange of your sold property.

Reverse 1031 Exchange:
The property that is a replacement is first kept with an exchange Qualified Intermediary and then only the sale of relinquished property in the given period is done.

Build-to-Suit 1031 Exchange
The funds generated from the sale of your relinquished property are use to buy and renovate your replacement like-kind property

1031 Exchange of Personal property
Your property can be interchanged with other like-kind of like-class personal property.

Qualifications in 1031 Exchange

Qualified Intermediary
You must carefully chose your QI and have QI attached to your relinquished property before the transaction is closed so that you can get tax-deferred benefits of the exchange.

Qualified use property
The property that is being sold and bought both should be used for purpose of rent, business or investment. Properties that are bought for the sole purpose of selling will not be considered for 1031 exchange.

Criteria under 1031 Exchange Reinvestment

Trade up in value or in equal
You can exchange the properties such that the net sales price of your replacement property is equal or more than the property that you have sold. This is no way related to equity as such.

100% reinvestment in like-kind property
Total proceeds from the sale of your relinquished property have to be put in your replacement property. You can get cash also but that is tax deductable.

Get equal or higher debt
Total amount of debt to be put on the new like-kind property is the difference between the price of your relinquished property and the property that you have got in exchange of that.

Some important timelines associated with 1031 Exchanges

You get a period of 45 days in which you can find and tell about the like-kind property you want to buy.
To complete a whole 1031 transaction you will get a total of 180 days.

Some 1031 identification guidelines

Three property rule

Investors can identify maximum of three properties that can be identified as a like-kind replacement property. This is irrespective of their prices in the free market. This upper limit is solely on the number of properties.

200% of Fair Market Value rule
Potential may choose and select as many like-kind properties they want but their overall valuation in the fair market should not be more than 200% the price of relinquished properties. This limit is solely on the price of the property in the fair market.

95% exclusion
In this rule the investors can identify as many properties they want for replacement but when they finally decide on the property as an actual replacement they have to close the transaction on 95% of the fair market price