One common point of confusion about the 1031 Exchange process comes from the word “exchange” itself.
Clients will often call our office wondering if, in order to qualify, they have to “exchange” or “trade” their property with someone else. For example, they may be under the impression that in order to do a 1031 Exchange of a duplex, they need to find another property owner of a duplex who would be willing to swap ownership with them.
Fortunately, that is not the case!
A 1031 Exchange essentially allows you to exchange your interest in one property (called the Relinquished Property) for a new interest in a Replacement Property. You own and control both. There are no trades or swaps necessary, and no third-party investors need to be involved.
There Are Rules You Must Follow, Though
While you won't have to trade your property with strangers, to legally complete a 1031 Exchange, there are other rules that you must abide by. For example, the process starts by hiring a Qualified Intermediary who will essentially facilitate the transaction as a neutral third party or “trustee.” Your QI will help you move through each stage of the process, from selling the Relinquished Property to identifying a Replacement Property and eventually closing on that property. Your QI will be there every step of the way to offer guidance and support and to answer all of your questions.
If you need assistance or you'd like to start the process, our team here at Brazos1031 Exchange Company would be happy to meet with you. To schedule a complimentary consultation, simply call us at (888) 508-1901.