What is the Timeline for a 1031 Exchange?
There are strict timing rules that must be followed in a 1031 exchange. Investors are allotted 45 days to identify potential replacement property(s) for their exchange. This 45-day countdown begins the moment escrow closes on the relinquished property and ends at midnight on the 45th day following the close of escrow. Once the 45-day identification period passes, investors cannot add more properties to their list of target properties.
Because this timeline is so tight, Legacy recommends Sacramento and California investors start looking for a replacement property even before their relinquished property is sold.
Once identified, the replacement property must be acquired within 180 days from the close of escrow date of the relinquished property or on the due date of the federal income tax return for the year in which the exchanger relinquished the property in the exchange. This 180-day period includes the 45 days used to identify the replacement property. Generally, no extensions are granted for deadlines that fall on weekends or holidays.
A lot needs to happen quickly once the exchange timeline begins. Investors have to identify replacement property(ies), conduct due diligence, qualify for a loan (if needed), and negotiate a purchase. Investors that fail to complete these tasks on time could be forced into an unsuitable investment, or risk their exchange being disqualified entirely.
When you work with Legacy, you won’t have to worry about timeline panic. We have the in-depth knowledge and experience needed to smoothly manage your 1031 exchange timeline and help you identify a variety of properties and back-ups.
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There are material risks associated with investing in private placements, Delaware Statutory Trusts (“DSTs”) and real estate securities including the potential loss of the entire investment principal, illiquidity, tenant vacancies impacting income and revenue, general and real estate market conditions, lack of operating history, interest rate risks, competition, including the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and investors should read the PPM carefully before investing paying special attention to the risk section. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Legacy Investments & Real Estate is independent of CIS and CAM.