Time the Market: Buy Now - Sell Later? Reverse Exchange

With market conditions the way they are, many clients are considering a Reverse 1031 Exchange. In a typical 1031 Exchange a property is sold, and then replacement property is acquired, in that order. With the Reverse 1031 Exchange the replacement property is acquired first.

Why Choose a Reverse Exchange?

1. Take Advantage of Seasonality - Often the best deals can be found toward the end of the year. With a Reverse 1031 Exchange, a property can be acquired today and then the 'relinquished' property can be sold in the spring time, when activity typically increases.

2. Take Advantage of Great Deal - Many investors don't have time to wait for a property to sell before they acquire something. They need to act fast. With the Reverse Exchange, there is no need to wait for the relinquished property to sell. If the perfect deal is found - make an offer.

3. Your Buyer Backs Out - Many standard 1031 Exchanges will turn into Reverse Exchanges. For example, an investor plans on selling an office building and exchanging into an apartment building. The buyer of the office building suddenly backs out, but the contract for the apartment building is binding. No problem - convert the standard exchange into a Reverse Exchange.

The procedure for a Reverse Exchange is much more complicated than a standard delayed exchange. It involves the 1031 Exchange Company creating an entity to act as "Exchange Accommodating Titleholder" and actually taking title to one of the properties involved in the exchange. It also involves very strict tax reporting of the property by both the owner and the Exchange Company. For these reasons, a Reverse Exchange can invite greater scrutiny from the taxing authorities, so it must be done correctly.

Call Scott Ivey
916-899-4839