1031 Exchanges for Dummies

[Steven Andrews]

Hi everyone,

I'm looking for a layman's explanation of how a 1031 exchange works. I did some searching in threads and many of the explanations are pretty complicated. Can someone post a simple step by step guide to the process?

And here are a few questions I have:

1. Do I need to sell my current investment property before starting a 1031 exchange or do I exchange with an offer on a new property at the same time?

2. If I sell first is there a time by which the funds need to be reinvested to qualify for the 1031 exchange (next 6 months, 12 months,etc.)?

3. Do all of the proceeds have to be used? E.g. I have a property for sale that will net 100K. Do I have to apply all 100K to a new property or can I apply only 20K or 40K?

4. I understand a company has to "process" the 1031 Exchange for me. Does that company have to be in the same state as me or as the state where the property will be purchased?

5. Are there any people here affiliated with a company that handles 1031 exchanges?

I think that's about all for now. Thanks in advance for the help with understanding how it works.

Steven

[Steven Andrews]

Thanks guys for the help. This makes it much more easy to understand. I was making it more complicated than it needed to be. @Dave Foster @Michael Skoczylas

A couple more questions...

1. What's the typical timeframe to set up a 1031 exchange? Does it need to be done prior to listing for sale or can it be after the relinquished property goes on the MLS? Or just any time before it closes?

2. Can there be any extension of the 45/180 day timelines or are those set in stone? If you don't meet the deadline do you just get the net proceeds like normal from the QI and pay taxes as you otherwise would have?

3. Does a representative of the QI actually have to attend the closing or just be involved in the paperwork?

4. What's the typical cost of hiring a QI to handle a 1031?

5. I think I understand this right... you can purchase multiple properties with the funds as long as all properties are purchased within the deadlines?

Thanks again for the assistance in explaining this. Hopefully these very helpful replies with assist others too.

Yours,

Steven