Monthly Archives: February 2018

Delayed exchange vs. simultaneous exchange: What’s the difference?

There are several ways you can exchange your property in 1031 exchange process. Each method will help you defer capital gains taxes.

You might have heard about simultaneous exchange and delayed exchange. So, what exactly is the difference between them?

Simultaneous exchange

It is the oldest form of exchange. The properties are swapped directly among two investors. You don’t need a QI for this process. The deeds are literally exchanged in this process, along with other crucial documents. No monetary exchange is involved in this process. It is quite difficult to achieve because you can’t find someone easily with a property whose value is same.

Delayed exchange

It’s the most common exchange type, as of now. It’s common because the exchanger gets a lot of time to find the property and close it. The proceeds obtained after selling the property are kept by a third party known as a qualified intermediary (QI). These proceeds are used for buying the property you have designated. The exchanger gets 45 days to designate the property and 180 days to close it.

Due to the enormous time received by the exchangers, delayed exchange is usually preferred. There are also other forms of exchange in this process, including improvement exchange, personal property exchange, and reverse exchange.

All these exchange types come with their unique benefits. If you are looking for replacement property in the USA, you can choose them with the help of FAI Exchange.

The benefits of delayed 1031 exchange

When we talk about 1031 exchanges, we are generally talking about the delayed exchange. It’s in a delayed exchange that you need a QI and you get some time to find the replacement property.

Let’s have a look at the benefits of this exchange type.

After selling your existing property, you get enough time to find a replacement property. The property can be designated within 45 days. There is also 180 days for closing the property you have designated.

In the conventional exchange, also known as a simultaneous exchange, the properties are exchanged between two parties. But, here you call to sell your property to one party and purchase the replacement property from another.

And of course, this exchange helps you defer capital gains tax during real estate transactions. Make sure to take the support of only qualified intermediary to hold the proceeds from relinquished property.

There is a modified version of delayed exchange known as improvement exchange. In this process, improvement of the replacement property is done for increasing its value. The reconstructions and improvements have to be completed in not more than 180 of selling your old property.

We will keep on updating you about the different aspects of 1031 like-kind exchange. We are also there to support you when you require a replacement property. You can connect with us for DST investments that are eligible for the exchanges.