1031 Exchange

Types of 1031 Exchanges

There are four main types of like kind exchanges investors can choose from. The most common like kind exchange types include the simultaneous, delayed, reverse, and construction or improvement exchange. Here we’ll give you the rundown on all four types. Find out which are the most popular and why, and learn when to use each one.

Structuring Your 1031 Exchange Transaction


Sometimes it's obvious which type of 1031 exchange to use. More often, property transactions are complex and it's not immediately obvious how or even if a transaction can qualify for a 1031 exchange. Use the information here as a guideline. Consult with Granite about the best way to structure your transaction to meet your needs.

There are a number of possibilities for making 1031 exchanges that vary in their timing and other details, each creating a set of requirements and procedures that have to be followed:

1031 exchange rules offer five ways in which you can roll proceeds from one asset into another, without incurring capital gain penalties. The following methods can be used, whether you are exchanging from one property to another, or are working with multiple assets.

Getting Started

These types of exchanges often require advance preparation to ensure adherence to regulatory requirements, as well as ensuring that all parties involved have ample time to make the necessary updates to their documentation.

Granite Exchange is available to discuss your transaction with you, and review the reverse exchange process step by step. 

Simultaneous Exchange

Initial property is sold and replacement property is purchased at the exact same time and at the same escrow office. This is the original type of 1031 exchange. Simultaneous exchanges are the oldest method of performing an IRC Section 1031 tax-deferred exchange. This type of exchange occurs when the relinquished property and the replacement property are transferred concurrently.

Construction or Improvement Exchange

Also known as a "construction" or "build-to-suit" exchange. In order to have a completely tax-deferred transaction, the exchanger must trade "across" or "up" in equity and debt. If the exchanger goes down in value when acquiring the replacement property he/she will have a tax liability on the cash or mortgage boot.

Delaware Statutory Trusts

DSTs provide an alternative source of replacement property for 1031 exchangers, utilizing special provisions of Delaware trust law to create the investment vehicle. Exchangers who purchase units in a properly structured DST are treated as having acquired their proportionate interest in the trust-owned real estate. DSTs offer the advantages of professional real estate management and diversification.

Delayed Exchange

Property is sold and replacement property is purchased within 180 days. The replacement property must be identified within 45 days. Because of the 180 day window, this is the most popular type of 1031 exchange. Click to see an outline of the steps in a typical 1031 exchange.

Reverse Exchange

The replacement property is purchased before the initial property is sold. This is an option when the exchanger must close on the replacement property before a buyer has been found for the relinquished property. Special care must be taken with reverse exchanges. In theory, this type of exchange is very simple: you buy first and you exchange later.

Blended 1031 Exchanges

The blended exchange refers to combining different exchange formats (delayed, reverse, and improvement) into one exchange. This approach allows for further 1031 Exchange flexibility, particularly when more than two properties are involved in the exchange. Contact Granite Exchange and speak with a facilitator to discuss how your 1031 Exchange may be structured to accomplish your investment goals.

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Granite Exchange is proud to have long-standing relationships with the intermediary community and we have a designated team supporting relationships with lawyers, accountants, tax advisors, investment consultants, corporate finance professionals, and trust companies.