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1031 Exchange Requirements

1031 Exchange Properties
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1031 Exchange-TIC Info
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1031 Exchange Requirement

Four requirements for all 1031 exchanges and tenants in common exchanges:

  • One hundred percent of the value of the relinquished investment property must be reinvested in the like kind investment property or investment properties at the time of the exchange.

  • The amount of equity held in the relinquished investment property must be less than the amount of equity held in the new, replacement investment property or investment properties.

  • Third 1031 Exchange Requirement: The property owner must use a Qualified intermediary ( 1031 exchange facilitator or 1031 exchange accommodator) to hold the funds from the first sale until purchase of the new investment property is closed. The Qualified Intermediary (QI) acts as the middle-man in the 1031 exchange, providing paperwork, oversight, escrow services, and expertise necessary to ensure that the transaction legally qualifies as a 1031 exchange.

  • Fourth 1031 Exchange Requirement: IRS rules require the exchange of like-kind investment property. This does not mean that 1031 exchange investment properties must be of the exact nature as the relinquished 1031 exchange investment property. Any real investment property held for investment or real investment property used in a trade or business can be exchanged in a 1031 exchange for any other real investment property held for investment or used in a trade or business.

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