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Reverse 1031 Exchange Services

Reverse 1031 exchanges allow you as an investor to acquire a new property now, when a fantastic opportunity may be available, and sell another property later, when you might get a better sale price, without paying capital gains tax. These exchanges are complex and require real expertise into the risks involved, as well as clear guidance on the process and its legality. Read on to learn everything you want to know about reverse 1031 exchanges and to see if they are right for you. 
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What is a Reverse 1031 Exchange?

A reverse 1031 exchange is advantageous when you have found the replacement property you want to buy before you have closed on the sale of your relinquished property. You can still defer capital gains taxes on the sale of your relinquished property, so long as you follow IRS regulations.

Reverse vs Traditional 1031 Exchanges (Side by Side Comparison)

Traditional 1031 Exchange

Reverse 1031 Exchange

  • Sell your relinquished property first

  • Park the relinquished property 

  • Buy a replacement property later

  • Buy a replacement property first

  • Park the replacement property

  • Sell your relinquished property later

Process Overview for a Reverse 1031 Exchange

Engaging a Exchange Accommodation Titleholder (EAT)

A qualified intermediary will serve as an Exchange Accommodation Titleholder (EAT), acquiring and holding the replacement property and parking it in a unique special purpose entity, typically a single member LLC. To fulfill the requirements of the reverse exchange, the EAT will take title to either the relinquished property or the replacement property under a “Qualified Exchange Accommodation Arrangement” (QEAA).

Detailed Timeline from Identifying to Closing on Properties

Once the EAT has started the exchange by acquiring and parking the new replacement property, you must identify one or more relinquished properties to be exchanged for it within 45 days. The identified relinquished property must then be sold, and the parked new property transferred to you, within 180 days.

What Is the ‘Safe Harbor’ Parking Arrangement?

The IRS has provided guidelines to facilitate exchanges, called the “safe harbor” parking arrangement. These state that an agreement must be entered into between you and an EAT within 5 days of the EAT taking title of the property that is to be parked. With a reverse exchange, identification of the relinquished property must happen within 45 days after the EAT acquires the title for the parked new property. And as with all exchanges, the combined time frame that the relinquished and replacement properties are held in a parking arrangement cannot extend beyond 180 days. 

Financial Planning for Reverse Exchanges

At 1031 Pros, we are committed to helping you plan for your exchange, so you make the most of your investment. Reverse 1031 exchanges are more complicated than traditional exchanges, and can be more time consuming and costly.

In reverse 1031 exchanges, you need to ensure that you have sufficient funds to purchase the replacement property, before you receive money from the sale of your relinquished property. This can include expenses such as transaction fees, legal fees, and the cost of financing. Financing the purchase of your new property can be a challenge, as some lenders are hesitant to provide loans without immediate sale proceeds as assurance. 

We are here to help guide you through the process, from start to finish.

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Image by Tyler Franta

Risks of Reverse Exchanges and How to Mitigate Them

A Tight Timeline

Your relinquished property must be identified within 45 days of acquiring your replacement property, and the entire transaction completed within 180 days. 

Tax Liability

If the relinquished property fails to sell within the 180 day timeline, you may be required to pay capital gains taxes. 

Legal and Administrative Requirements

In some cases, there are additional requirements to fulfill in order to complete your reverse 1031 exchange. Our experts will help you ensure that the process runs smoothly and successfully.

Real Estate Market Insights for Reverse Exchanges

Before acquiring a replacement property, you should undertake thorough research on it, including the location, market conditions, potential income from renting, and any outstanding liabilities or legal issues. In some locations, reverse 1031 exchanges are impacting the real estate market, as investors use them to strengthen their real estate portfolios, which can have an impact on supply and demand and trends in pricing. We will help you stay informed about trends and regulatory considerations so you thoroughly understand the potential impact of reverse exchanges on your investment portfolio. 

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Image by Gabrielle Henderson

Legal and Tax Implications

As with all real estate transactions, reverse 1031 exchanges must conform to IRS guidelines and laws at the state and local level; they must also be compliant with the rules specific to 1031 exchanges. At 1031 Pros, we are expert professionals who specialize in real estate and tax considerations, and so we can help you mitigate risks and navigate this often complex process. 

Choosing a Qualified Intermediary for Reverse 1031 Exchanges

Not All Qualified Intermediaries Handle Reverse Exchanges

Because reverse 1031 exchanges are more complex than traditional exchanges, not all qualified intermediaries handle them. At 1031 Pros, we are fully prepared to help with all forms of 1031 exchanges, including reverse exchanges. With us, you will get:

  • Service in all 50 states from experienced 1031 exchange experts

  • All of the appropriate documents for the escrow or title company, to be signed at the closing of your relinquished property

  • A unique, FDIC-insured individual account used for each transaction

  • Coordination with your title company and transfer of funds on the close of your replacement property

  • Release of exchange funds to a legitimate real estate closing, with the exchanger’s signed release.

Assistance After Your Reverse Exchange

As expert 1031 advisors, we offer full and complete service for your exchange, including ongoing compliance checks, tax advice, access to a network of property management and real estate experts, and much more. We will even work with you to create a long-term real estate investment strategy, to be sure that you are maximizing your investments and building a strong portfolio. Got questions? We’re ready. 

Top Tier Customer Service

Our customer service is unmatched in the industry, including a live person answering the phone when you call at any time, 24/7, and responses to emailed questions within 24 hours. 

Contact us at 916-252-6900 for a free consultation before closing on your new replacement property, to ensure that you are set up for success.

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Whether you're ready to sell today or in the future, we are happy to answer any questions you may have about your real estate portfolio.


Reach out to learn how we can help save you money and grow your portfolio.

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  • What type of property qualifies for a 1031 exchange?
    Any property held for productive use in a trade or business or for investment can be exchange for like-kind property. "Like-kind" refers to the nature of the investment. Any type of real property can be exchanged for another type of real property. For example: A single family rental can be exchanged for a duplex. Raw land can be exchanged for a shopping center or an office space for apartments. Any combination will work. This gives the investor flexibility to change investment strategies to fulfill their portfolio needs.
  • What Does Not Qualify?
    A personal residence, developed lots, home flipping, partnership interests or property held for resale immediately after acquisition. Second homes may or may not qualify depending upon the use and how it's reported for income tax purposes.
  • What kind of exchanges does 1031 pros handle?
    We handle all types of exchanges: Delayed Exchanges, Reverse Exchanges and Build to Suit Exchanges. From the simple to the complex, we can handle any type of exchange.
  • Does 1031 Pros handle exchanges in any state?
    Yes. We can handle exchanges for any property in any of the 50 states.
  • How much notice do I need to do a 1031 Exchange?
    You can do a 1031 exchange any time before closing on the sale of your investment property. Like we said before, we're fast.
  • How long do I need to own my investment property before I can exchange it for another?
    There is no set timeline, but to avoid any issues you should at least own it for a minimum of 12 months.
  • What happens if I don't close on my replacement property within 180 days?
    Then you just pay the capital gain taxes like your would have if you were to sell the property in the first place.
  • Can I sell one property and exchange into multiple properties?
    Yes, in most cases you can exchange into three other properties.
  • Why should I use a qualified 1031 intermediary to do my exchange?
    We will prepare all the correct paperwork you will need to file your taxes with. We will also ensure you meet your timelines and any other specifics of the 1031 tax code.
  • What if my Title company is a qualified 1031 intermediary?
    1031 Pros specializes in exchanges and has the expertise, experience and history to ensure an audit free exchange.
  • What is a reverse exchange?
    A reverse exchange is when you close on the purchase of the replacement property before you close on the sale of the relinquished property. Many real estate investors will utilize a reverse exchange to acquire a replacement property in a market where there may be competing offers or there is a need to close fast. Because of our vast experience handling these types of exchanges, we offer very competitive rates and are willing to match any competitor pricing.
  • What is an improvement exchange?
    Also referred to as a construction exchange or build-to-suit exchange, improvement exchanges offer real estate investors nice benefits, which often result in better investment opportunities than properties readily available on the market. The ability to remodel, add capital improvements, or build from the ground up, while using tax-deferred dollars, allows an investor to reinvest in a replacement property that meets their exact investment criteria.
  • What is the Federation of Exchange Accommodators?
    The Federation of Exchange Accommodators (FEA) is the only national trade association organized to represent professionals who conduct like-kind exchanges under Internal Revenue Code §1031. Members include Qualified Intermediaries (QIs), their primary tax and legal counsel, and affiliated industries (TIC sponsors, banks, real estate brokers, title companies, settlement/escrow agents, etc.). 1031 Pros is a proud member of the FEA.
  • Can I 1031 exchange into a Tenancy in Common or Triple Net Lease Property?
    Yes, you can exchange into a Tenant In Common (TIC) or Triple Net Lease real estate investments. The biggest rule of thumb is that your name is on the title as an owner with a percentage of ownership. These types of real estate investments offer a great passive income for those who are done with being a landlord and are ready to sit back and collect a monthly check. We do not offer these types of investments at 1031 Pros, but we have some great partners who do. Call us today to learn more.
  • Does my personal residence qualify for a 1031 exchange?
    No, it does not. Personal residences qualify for different tax benefits under IRS Code Section 121. Section 121 allows a taxpayer to exclude up to $250,000 ($500,000 for certain taxpayers who file a joint return) of the gain from the sale (or exchange) of property owned and used as a principal residence for at least two of the five years before the sale. 1031 Pros does not offer any services or tax advice for personal residences. Please contact our trusted Accounting partners under the "More Tab" for more information on Section 121. Tell them 1031 Pros sent you!
  • Are my funds insured?
    Each of our exchanges uses a unique, individual, FDIC insured account. 1031 Pros also has additional bonding and insurance, so your funds are always safe and secure.

Have More Questions? Send Us a Message.

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