Improvement exchanges allow you to use the proceeds from the exchange of your relinquished property to make improvements to the replacement property. This usually happens when the fair market value of the replacement property is less than that of the relinquished property. If you were to simply acquire the replacement property and construct the improvements, the improvements would not qualify as like-kind property. Therefore, you cannot take title to the replacement property until the improvements are completed. Typically, the Qualified Intermediary (QI) (or an affiliate of the QI, such as Reverse 1031 CORP.) will create a special purpose entity (SPE) to take title to the replacement property directly from the seller, sign the contract with the builder and have the improvements completed. Once the improvements are completed, the SPE conveys title to you at the higher price to complete your 1031 exchange.
The 1031 team brings over 150 years of combined exchange industry experience and has facilitated thousands of exchanges. Based in Collegeville, Pennsylvania and Bend, Oregon, our exchange experts are ready to answer your questions, guide the process, and facilitate your exchange.
"Can't praise this company & group enough. They have been professional, efficient and friendly through every transaction I have done with all my 1031 experiences over the years."
-- P.G., Milton, DE