1031 Exchange Timeframe

[Matthew Wright]

How long do you have to hold on to capital before you have to deploy it into the next deal?

[Dave Foster]

@Matthew Wright, You use some interesting phrasing (broker dealer speak :) so I'm not exactly sure what you're meaning to ask.  If you're asking about the two calendar statutes within a 1031 exchange then you have 45 days from the date of the close of your sale to identify your potential replacement property or properties.  Also from the date of the close of your sale you have 180 days to complete the purchase and the property must be one or more of the properties on your 45 day list.  So the most critical time frame is the first 45 days because after day 45 your list is set in stone and cannot be changed.

If you're asking how long you have to hold onto a property before you sell it and do another 1031 exchange then I would tell you that there is no statutory holding period.  What is critical is that in order to be eligible for 1031 you must have had the intent to hold it for productive use.  Length of time held is only one test of that intent.  So is actual use, past practice, and other circumstances.  Most folks will tell you that if you've owned the property for more than a year you're pretty safe.  But there are always circumstances that could validate a shorter or longer holding period.

And finally, if you're asking how long you have to hold cash (capital) after a sale before you can put it into the next deal it is irrelevant.  Because a 1031 exchange is the sale of a piece of investment property followed by the purchase of a piece of investment property within the regulatory timelines and process.  And the biggest of the requirements is that you cannot have actual or constructive receipt of the funds.  So if you've touched the money from a property sale you cannot complete a 1031 exchange.