If you have basic knowledge of 1031 exchange process, you might be aware of the fact that the investor gets a window of 45 days to identify a property and 180 days to close it. This is one of the most popular forms of 1031 exchange to defer capital gains tax and is referred to as delayed exchange.
In this exchange type, you need a middleman (or qualified intermediary) who keeps the cash obtained after selling the home. This cash is used for purchasing replacement property to complete the exchange.
Well, there are also other methods that real estate investors use for 1031 exchange.
The oldest method is known as simultaneous exchange. In this exchange type, the properties are swapped simultaneously between the investors. And, as there is monetary exchange involved, you don’t require a QI. As it becomes difficult to execute this type of exchange, it has become unpopular among investors.
Some investors also exchange their property through improvement exchange. This exchange involves improvement of replacement property to increase its value. Improvements and reconstructions have to be done within 180 days of selling the relinquished property.
Personal property exchange is another method to swap a personal asset for another of the same kind. The assets include artworks, livestock, business licenses, website url, and copyrights. The time-frame is 180 days.
There’s also a reverse exchange process used by some investors. The investor acquires the replacement property before selling his asset.