<p style="margin-bottom: 10px;">Most Section 1031 Like-Kind Exchange transactions involve a taxpayer who sells a relinquished property and then acquires a replacement property within the appropriate guidelines. An increasing number of exchangers are structuring their transactions as 1031 reverse exchanges, wherein the taxpayer first arranges for the acquisition of the replacement property and later sells their relinquished property. But there is a hybrid solution that often is overlooked – this is a combination <a href="https://www.accruit.com/property-owners/1031-exchange-explained&quot; title="forward-reverse exchange">forward-reverse exchange</a>.</p>

<h2 class="MsoNormal"><a style="mso-comment-reference:AA_1;
mso-comment-date:20210518T1416"><span style="mso-comment-continuation:2"><span style="mso-comment-continuation:3"><b>The Situation</b></span></span></a></h2>

<p class="MsoNormal">Karen currently owns a small strip center and has received an attractive offer to sell the property for $500,000. She also has a small office building she is trying to sell, also worth about $500,000. She was planning to sell both properties and combine the proceeds to acquire replacement property worth at least $1,000,000.<o:p></o:p></p>

<h2 class="MsoNormal"><a style="mso-comment-reference:AA_4;
mso-comment-date:20210518T1416"><span style="mso-comment-continuation:5"><span style="mso-comment-continuation:6"><b>The Problem</b></span></span></a></h2>

<p class="MsoNormal">Karen’s small strip center will close in about 45 days, but she has not yet received any offers on the office building. The fact that she has identified a suitable replacement property for which the seller has agreed to accept $1,000,000 if she can close in 60 days further complicates matters. With the office building being under contract and not yet the subject of negotiations, she is worried about how to accomplish her <a href="https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex…; title="1031 exchange goals">1031 exchange goals</a>.<o:p></o:p></p>

<h2 class="MsoNormal"><b>The Solution: A Combination Forward-Reverse Hybrid 1031 Exchange<o:p></o:p></b></h2>

<p class="MsoNormal">Karen will structure the sale of her small strip center as part of a <a href="https://www.accruit.com/blog/tax-code-sections-1031-and-1033-whats-diff…; title="section 1031 like-kind exchange">Section 1031 Like-Kind Exchange</a>. After consultation with her attorney and Accruit as the Qualified Intermediary (“QI”), Karen understands both the forward 1031 exchange and <a href="https://www.accruit.com/blog/infographic-10-steps-reverse-exchange&quot; title="reverse 1031 exchange">reverse 1031 exchanges</a> process.<o:p></o:p></p>

<p class="MsoNormal">The sale of the strip center took place on March 1, 2021, and the exchange proceeds were sent directly to Accruit, the qualified intermediary, to be held on her behalf until the purchase of her replacement property. This is necessary because a taxpayer participating in a like-kind exchange cannot be in actual or constructive receipt of the net sale proceeds while the exchange is pending.<o:p></o:p></p>

<p class="MsoNormal">Within 45 days after the closing on the sale, Karen identified a one-half interest in her target replacement property using <a href="https://www.accruit.com/blog/what-are-rules-identification-and-receipt-… Rules in 1031 Exchanges</a>. Karen also worked closely with the qualified intermediary, Accruit, to begin the reverse exchange component of her transaction. Accruit, through its affiliate, known as an Exchange Accommodation Titleholder (“EAT”) will take title to the other one-half interest in Karen’s target replacement property.<o:p></o:p></p>

<p class="MsoNormal">Specifically, Karen will lend the additional $500,000 to a new LLC (let us call it Newco LLC), with the EAT as its sole member, which was established specifically for the purpose of facilitating the reverse 1031 exchange. The loan from Karen to Newco LLC will be documented by a note and secured with a pledge of the EAT’s membership interest in Newco LLC.<o:p></o:p></p>

<p class="MsoNormal">Karen ultimately closes on the acquisition of the target replacement property on April 30, 2021, with title vested 50% in her personal name and 50% in Newco LLC, as tenants in common. (Learn more about <a href="https://www.accruit.com/blog/fractional-ownership-real-estate">Tenants in Common</a>.) On June 1, 2021, while the replacement property is held by Karen and Newco, Karen enters a contract to sell the small office building, her second relinquished property, for $540,000, with a closing date of August 20, 2021. At closing, after all closing costs are paid, the net proceeds of $500,000 will be deposited into Karen’s exchange account with Accruit. Karen will acquire the remaining 50% tenancy in common interest from the EAT and will direct Accruit to transfer the funds from the exchange account to the closing agent for this portion of the transaction.<span style="mso-spacerun:yes">&nbsp; </span>Immediately Upon receipt of those funds the EAT will direct the closing agent to remit that sum to Karen to pay off the loan that was made to the EAT to acquire the new property. Upon payoff of the $500,000 loan owed to Karen, Karen receives full ownership of the replacement property.<span style="mso-spacerun:yes">&nbsp; </span>In this manner it is the same as if Karen had acquired the replacement property outright from seller.<o:p></o:p></p>

<h2 class="MsoNormal"><b>The Result<o:p></o:p></b></h2>

<p class="MsoNormal">Karen used the forward exchange for the sale of the strip center and the reverse exchange for the sale of the office building to ultimately acquire 100% of the new building, deferring the taxes on both sales in the process. In doing so, Karen exchanged from two properties worth approximately $1,000,000 into a single, more desirable building worth about the same.<o:p></o:p></p>

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<p style="text-align:center"><a href="https://cta-redirect.hubspot.com/cta/redirect/6205670/914580be-98fb-4bc…; target="_blank"><img alt="Start Your 1031 Exchange with Accruit today" class="hs-cta-img" height="295" id="hs-cta-img-914580be-98fb-4bcd-896e-3085b6212867" src="https://no-cache.hubspot.com/cta/default/6205670/914580be-98fb-4bcd-896…; style="border-width:0px;" width="800" /></a></p>
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<p style="margin-bottom: 10px;">Most Section 1031 Like-Kind Exchange transactions involve a taxpayer who sells a relinquished property and then acquires a replacement property within the appropriate guidelines. An increasing number of exchangers are structuring their transactions as 1031 reverse exchanges, wherein the taxpayer first arranges for the acquisition of the replacement property and later sells their relinquished property. But there is a hybrid solution that often is overlooked – this is a combination <a href="https://www.accruit.com/property-owners/1031-exchange-explained&quot; title="forward-reverse exchange">forward-reverse exchange</a>.</p>

<h2 class="MsoNormal"><a style="mso-comment-reference:AA_1;
mso-comment-date:20210518T1416"><span style="mso-comment-continuation:2"><span style="mso-comment-continuation:3"><b>The Situation</b></span></span></a></h2>

<p class="MsoNormal">Karen currently owns a small strip center and has received an attractive offer to sell the property for $500,000. She also has a small office building she is trying to sell, also worth about $500,000. She was planning to sell both properties and combine the proceeds to acquire replacement property worth at least $1,000,000.<o:p></o:p></p>

<h2 class="MsoNormal"><a style="mso-comment-reference:AA_4;
mso-comment-date:20210518T1416"><span style="mso-comment-continuation:5"><span style="mso-comment-continuation:6"><b>The Problem</b></span></span></a></h2>

<p class="MsoNormal">Karen’s small strip center will close in about 45 days, but she has not yet received any offers on the office building. The fact that she has identified a suitable replacement property for which the seller has agreed to accept $1,000,000 if she can close in 60 days further complicates matters. With the office building being under contract and not yet the subject of negotiations, she is worried about how to accomplish her <a href="https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex…; title="1031 exchange goals">1031 exchange goals</a>.<o:p></o:p></p>

<h2 class="MsoNormal"><b>The Solution: A Combination Forward-Reverse Hybrid 1031 Exchange<o:p></o:p></b></h2>

<p class="MsoNormal">Karen will structure the sale of her small strip center as part of a <a href="https://www.accruit.com/blog/tax-code-sections-1031-and-1033-whats-diff…; title="section 1031 like-kind exchange">Section 1031 Like-Kind Exchange</a>. After consultation with her attorney and Accruit as the Qualified Intermediary (“QI”), Karen understands both the forward 1031 exchange and <a href="https://www.accruit.com/blog/infographic-10-steps-reverse-exchange&quot; title="reverse 1031 exchange">reverse 1031 exchanges</a> process.<o:p></o:p></p>

<p class="MsoNormal">The sale of the strip center took place on March 1, 2021, and the exchange proceeds were sent directly to Accruit, the qualified intermediary, to be held on her behalf until the purchase of her replacement property. This is necessary because a taxpayer participating in a like-kind exchange cannot be in actual or constructive receipt of the net sale proceeds while the exchange is pending.<o:p></o:p></p>

<p class="MsoNormal">Within 45 days after the closing on the sale, Karen identified a one-half interest in her target replacement property using <a href="https://www.accruit.com/blog/what-are-rules-identification-and-receipt-… Rules in 1031 Exchanges</a>. Karen also worked closely with the qualified intermediary, Accruit, to begin the reverse exchange component of her transaction. Accruit, through its affiliate, known as an Exchange Accommodation Titleholder (“EAT”) will take title to the other one-half interest in Karen’s target replacement property.<o:p></o:p></p>

<p class="MsoNormal">Specifically, Karen will lend the additional $500,000 to a new LLC (let us call it Newco LLC), with the EAT as its sole member, which was established specifically for the purpose of facilitating the reverse 1031 exchange. The loan from Karen to Newco LLC will be documented by a note and secured with a pledge of the EAT’s membership interest in Newco LLC.<o:p></o:p></p>

<p class="MsoNormal">Karen ultimately closes on the acquisition of the target replacement property on April 30, 2021, with title vested 50% in her personal name and 50% in Newco LLC, as tenants in common. (Learn more about <a href="https://www.accruit.com/blog/fractional-ownership-real-estate">Tenants in Common</a>.) On June 1, 2021, while the replacement property is held by Karen and Newco, Karen enters a contract to sell the small office building, her second relinquished property, for $540,000, with a closing date of August 20, 2021. At closing, after all closing costs are paid, the net proceeds of $500,000 will be deposited into Karen’s exchange account with Accruit. Karen will acquire the remaining 50% tenancy in common interest from the EAT and will direct Accruit to transfer the funds from the exchange account to the closing agent for this portion of the transaction.<span style="mso-spacerun:yes">&nbsp; </span>Immediately Upon receipt of those funds the EAT will direct the closing agent to remit that sum to Karen to pay off the loan that was made to the EAT to acquire the new property. Upon payoff of the $500,000 loan owed to Karen, Karen receives full ownership of the replacement property.<span style="mso-spacerun:yes">&nbsp; </span>In this manner it is the same as if Karen had acquired the replacement property outright from seller.<o:p></o:p></p>

<h2 class="MsoNormal"><b>The Result<o:p></o:p></b></h2>

<p class="MsoNormal">Karen used the forward exchange for the sale of the strip center and the reverse exchange for the sale of the office building to ultimately acquire 100% of the new building, deferring the taxes on both sales in the process. In doing so, Karen exchanged from two properties worth approximately $1,000,000 into a single, more desirable building worth about the same.<o:p></o:p></p>

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<p style="text-align:center"><a href="https://cta-redirect.hubspot.com/cta/redirect/6205670/914580be-98fb-4bc…; target="_blank"><img alt="Start Your 1031 Exchange with Accruit today" class="hs-cta-img" height="295" id="hs-cta-img-914580be-98fb-4bcd-896e-3085b6212867" src="https://no-cache.hubspot.com/cta/default/6205670/914580be-98fb-4bcd-896…; style="border-width:0px;" width="800" /></a></p>
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<p style="margin-bottom: 10px;">Most Section 1031 Like-Kind Exchange transactions involve a taxpayer who sells a relinquished property and then acquires a replacement property within the appropriate guidelines. An increasing number of exchangers are structuring their transactions as 1031 reverse exchanges, wherein the taxpayer first arranges for the acquisition of the replacement property and later sells their relinquished property. But there is a hybrid solution that often is overlooked – this is a combination <a href="https://www.accruit.com/property-owners/1031-exchange-explained&quot; title="forward-reverse exchange">forward-reverse exchange</a>.</p>

<h2 class="MsoNormal"><a style="mso-comment-reference:AA_1;
mso-comment-date:20210518T1416"><span style="mso-comment-continuation:2"><span style="mso-comment-continuation:3"><b>The Situation</b></span></span></a></h2>

<p class="MsoNormal">Karen currently owns a small strip center and has received an attractive offer to sell the property for $500,000. She also has a small office building she is trying to sell, also worth about $500,000. She was planning to sell both properties and combine the proceeds to acquire replacement property worth at least $1,000,000.<o:p></o:p></p>

<h2 class="MsoNormal"><a style="mso-comment-reference:AA_4;
mso-comment-date:20210518T1416"><span style="mso-comment-continuation:5"><span style="mso-comment-continuation:6"><b>The Problem</b></span></span></a></h2>

<p class="MsoNormal">Karen’s small strip center will close in about 45 days, but she has not yet received any offers on the office building. The fact that she has identified a suitable replacement property for which the seller has agreed to accept $1,000,000 if she can close in 60 days further complicates matters. With the office building being under contract and not yet the subject of negotiations, she is worried about how to accomplish her <a href="https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex…; title="1031 exchange goals">1031 exchange goals</a>.<o:p></o:p></p>

<h2 class="MsoNormal"><b>The Solution: A Combination Forward-Reverse Hybrid 1031 Exchange<o:p></o:p></b></h2>

<p class="MsoNormal">Karen will structure the sale of her small strip center as part of a <a href="https://www.accruit.com/blog/tax-code-sections-1031-and-1033-whats-diff…; title="section 1031 like-kind exchange">Section 1031 Like-Kind Exchange</a>. After consultation with her attorney and Accruit as the Qualified Intermediary (“QI”), Karen understands both the forward 1031 exchange and <a href="https://www.accruit.com/blog/infographic-10-steps-reverse-exchange&quot; title="reverse 1031 exchange">reverse 1031 exchanges</a> process.<o:p></o:p></p>

<p class="MsoNormal">The sale of the strip center took place on March 1, 2021, and the exchange proceeds were sent directly to Accruit, the qualified intermediary, to be held on her behalf until the purchase of her replacement property. This is necessary because a taxpayer participating in a like-kind exchange cannot be in actual or constructive receipt of the net sale proceeds while the exchange is pending.<o:p></o:p></p>

<p class="MsoNormal">Within 45 days after the closing on the sale, Karen identified a one-half interest in her target replacement property using <a href="https://www.accruit.com/blog/what-are-rules-identification-and-receipt-… Rules in 1031 Exchanges</a>. Karen also worked closely with the qualified intermediary, Accruit, to begin the reverse exchange component of her transaction. Accruit, through its affiliate, known as an Exchange Accommodation Titleholder (“EAT”) will take title to the other one-half interest in Karen’s target replacement property.<o:p></o:p></p>

<p class="MsoNormal">Specifically, Karen will lend the additional $500,000 to a new LLC (let us call it Newco LLC), with the EAT as its sole member, which was established specifically for the purpose of facilitating the reverse 1031 exchange. The loan from Karen to Newco LLC will be documented by a note and secured with a pledge of the EAT’s membership interest in Newco LLC.<o:p></o:p></p>

<p class="MsoNormal">Karen ultimately closes on the acquisition of the target replacement property on April 30, 2021, with title vested 50% in her personal name and 50% in Newco LLC, as tenants in common. (Learn more about <a href="https://www.accruit.com/blog/fractional-ownership-real-estate">Tenants in Common</a>.) On June 1, 2021, while the replacement property is held by Karen and Newco, Karen enters a contract to sell the small office building, her second relinquished property, for $540,000, with a closing date of August 20, 2021. At closing, after all closing costs are paid, the net proceeds of $500,000 will be deposited into Karen’s exchange account with Accruit. Karen will acquire the remaining 50% tenancy in common interest from the EAT and will direct Accruit to transfer the funds from the exchange account to the closing agent for this portion of the transaction.<span style="mso-spacerun:yes">&nbsp; </span>Immediately Upon receipt of those funds the EAT will direct the closing agent to remit that sum to Karen to pay off the loan that was made to the EAT to acquire the new property. Upon payoff of the $500,000 loan owed to Karen, Karen receives full ownership of the replacement property.<span style="mso-spacerun:yes">&nbsp; </span>In this manner it is the same as if Karen had acquired the replacement property outright from seller.<o:p></o:p></p>

<h2 class="MsoNormal"><b>The Result<o:p></o:p></b></h2>

<p class="MsoNormal">Karen used the forward exchange for the sale of the strip center and the reverse exchange for the sale of the office building to ultimately acquire 100% of the new building, deferring the taxes on both sales in the process. In doing so, Karen exchanged from two properties worth approximately $1,000,000 into a single, more desirable building worth about the same.<o:p></o:p></p>

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<p style="margin-bottom: 10px;">Most Section 1031 Like-Kind Exchange transactions involve a taxpayer who sells a relinquished property and then acquires a replacement property within the appropriate guidelines. An increasing number of exchangers are structuring their transactions as 1031 reverse exchanges, wherein the taxpayer first arranges for the acquisition of the replacement property and later sells their relinquished property. But there is a hybrid solution that often is overlooked – this is a combination <a href="https://www.accruit.com/property-owners/1031-exchange-explained&quot; title="forward-reverse exchange">forward-reverse exchange</a>.</p>

<h2 class="MsoNormal"><a style="mso-comment-reference:AA_1;
mso-comment-date:20210518T1416"><span style="mso-comment-continuation:2"><span style="mso-comment-continuation:3"><b>The Situation</b></span></span></a></h2>

<p class="MsoNormal">Karen currently owns a small strip center and has received an attractive offer to sell the property for $500,000. She also has a small office building she is trying to sell, also worth about $500,000. She was planning to sell both properties and combine the proceeds to acquire replacement property worth at least $1,000,000.<o:p></o:p></p>

<h2 class="MsoNormal"><a style="mso-comment-reference:AA_4;
mso-comment-date:20210518T1416"><span style="mso-comment-continuation:5"><span style="mso-comment-continuation:6"><b>The Problem</b></span></span></a></h2>

<p class="MsoNormal">Karen’s small strip center will close in about 45 days, but she has not yet received any offers on the office building. The fact that she has identified a suitable replacement property for which the seller has agreed to accept $1,000,000 if she can close in 60 days further complicates matters. With the office building being under contract and not yet the subject of negotiations, she is worried about how to accomplish her <a href="https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex…; title="1031 exchange goals">1031 exchange goals</a>.<o:p></o:p></p>

<h2 class="MsoNormal"><b>The Solution: A Combination Forward-Reverse Hybrid 1031 Exchange<o:p></o:p></b></h2>

<p class="MsoNormal">Karen will structure the sale of her small strip center as part of a <a href="https://www.accruit.com/blog/tax-code-sections-1031-and-1033-whats-diff…; title="section 1031 like-kind exchange">Section 1031 Like-Kind Exchange</a>. After consultation with her attorney and Accruit as the Qualified Intermediary (“QI”), Karen understands both the forward 1031 exchange and <a href="https://www.accruit.com/blog/infographic-10-steps-reverse-exchange&quot; title="reverse 1031 exchange">reverse 1031 exchanges</a> process.<o:p></o:p></p>

<p class="MsoNormal">The sale of the strip center took place on March 1, 2021, and the exchange proceeds were sent directly to Accruit, the qualified intermediary, to be held on her behalf until the purchase of her replacement property. This is necessary because a taxpayer participating in a like-kind exchange cannot be in actual or constructive receipt of the net sale proceeds while the exchange is pending.<o:p></o:p></p>

<p class="MsoNormal">Within 45 days after the closing on the sale, Karen identified a one-half interest in her target replacement property using <a href="https://www.accruit.com/blog/what-are-rules-identification-and-receipt-… Rules in 1031 Exchanges</a>. Karen also worked closely with the qualified intermediary, Accruit, to begin the reverse exchange component of her transaction. Accruit, through its affiliate, known as an Exchange Accommodation Titleholder (“EAT”) will take title to the other one-half interest in Karen’s target replacement property.<o:p></o:p></p>

<p class="MsoNormal">Specifically, Karen will lend the additional $500,000 to a new LLC (let us call it Newco LLC), with the EAT as its sole member, which was established specifically for the purpose of facilitating the reverse 1031 exchange. The loan from Karen to Newco LLC will be documented by a note and secured with a pledge of the EAT’s membership interest in Newco LLC.<o:p></o:p></p>

<p class="MsoNormal">Karen ultimately closes on the acquisition of the target replacement property on April 30, 2021, with title vested 50% in her personal name and 50% in Newco LLC, as tenants in common. (Learn more about <a href="https://www.accruit.com/blog/fractional-ownership-real-estate">Tenants in Common</a>.) On June 1, 2021, while the replacement property is held by Karen and Newco, Karen enters a contract to sell the small office building, her second relinquished property, for $540,000, with a closing date of August 20, 2021. At closing, after all closing costs are paid, the net proceeds of $500,000 will be deposited into Karen’s exchange account with Accruit. Karen will acquire the remaining 50% tenancy in common interest from the EAT and will direct Accruit to transfer the funds from the exchange account to the closing agent for this portion of the transaction.<span style="mso-spacerun:yes">&nbsp; </span>Immediately Upon receipt of those funds the EAT will direct the closing agent to remit that sum to Karen to pay off the loan that was made to the EAT to acquire the new property. Upon payoff of the $500,000 loan owed to Karen, Karen receives full ownership of the replacement property.<span style="mso-spacerun:yes">&nbsp; </span>In this manner it is the same as if Karen had acquired the replacement property outright from seller.<o:p></o:p></p>

<h2 class="MsoNormal"><b>The Result<o:p></o:p></b></h2>

<p class="MsoNormal">Karen used the forward exchange for the sale of the strip center and the reverse exchange for the sale of the office building to ultimately acquire 100% of the new building, deferring the taxes on both sales in the process. In doing so, Karen exchanged from two properties worth approximately $1,000,000 into a single, more desirable building worth about the same.<o:p></o:p></p>

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<p style="text-align:center"><a href="https://cta-redirect.hubspot.com/cta/redirect/6205670/914580be-98fb-4bc…; target="_blank"><img alt="Start Your 1031 Exchange with Accruit today" class="hs-cta-img" height="295" id="hs-cta-img-914580be-98fb-4bcd-896e-3085b6212867" src="https://no-cache.hubspot.com/cta/default/6205670/914580be-98fb-4bcd-896…; style="border-width:0px;" width="800" /></a></p>
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<p><span><span><span><span><span>In a hot market or market’s with limited inventory, the 45-day identification rules under a 1031 tax deferred exchange can feel like too small a window.&nbsp;<em><span>(To read more about 1031 exchange process and rules, visit our&nbsp;</span></em></span></span><span><a href="https://www.accruit.com/property-owners/1031-exchange-explained"><i><sp… explained</span></span></i></a></span><em><span><span>&nbsp;page)</span></span></em><span><span>&nbsp;Luckily, the&nbsp;</span></span><span><a href="https://www.accruit.com/blog/1031-like-kind-exchanges-myths-vs-realitie… exchange rules</span></span></a></span><span><span>&nbsp;provide for the ‘Reverse 1031 Exchange’ to exist. Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence, also approved by the IRS, is often referred to as a “</span></span><span><a href="https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex… 1031 exchange</span></span></a></span><span class="MsoHyperlink"><span><span><span><span>.</span></span></span></span></span><span><span>” The reverse exchange technique essentially consists of an exchange accommodator holding or “parking” title to the new property on behalf of the taxpayer to avoid the taxpayer having simultaneous ownership of two properties. Immediately after the sale of the old property (but no later than 180 days) the exchange accommodator transfers the new property to the taxpayer. This 'technically' creates the proper sequence. <b>Financing the Purchase of the Replacement Property</b></span></span></span></span></span></p>

<p><span><span><span><span><span>The concept of a Reverse 1031 exchange can sound attractive to many investors until the reality of financing the purchase of the replacement property is considered.&nbsp; For investors with the means to purchase the property outright in cash or those with strong lending relationships this can be relatively straightforward, however, for others they must ensure they take some nuances into consideration such as:</span></span></span></span></span></p>

<ol>
<li><span><span><span><span><span>The title to the replacement property will be parked with an entity created by the Qualified Intermediary for the sole purpose of holding title to the property.&nbsp; The loan cannot be in the name of the taxpayer, but instead must be in the name of the parking entity.&nbsp; This requires a short-term bridge loan that can be refinanced into a longer-term loan or paid down once the old property is sold and new property is transferred into the name of the taxpayer.&nbsp; Many banks will not entertain these loans as they do not fit into their traditional lending model.&nbsp; It may take some time discussing with several local or regional banks to get them to understand the structure.&nbsp; </span></span></span></span></span></li>
<li><span><span><span><span><span>Ensure you have sufficient collateral and equity.&nbsp; Banks will underwrite the replacement property as well as look at the taxpayers overall financial position to ensure adequate coverage.&nbsp; Traditionally, banks are willing to lend between 65-75% of the replacement property’s value to qualified buyers depending on the type of property and quality of collateral.</span></span></span></span></span></li>
<li><span><span><span><span><span>Think about financing well in advance of pursuing a purchase through a reverse 1031 exchange.&nbsp; Banks take time to order appraisals and underwrite collateral for specialty bridge financing.&nbsp; This can be several weeks.&nbsp; If you are in a rush and can’t wait for a bank, there are lenders willing to provide these types of loans, but you are going to pay handsomely for it in rate and upfront fees</span></span></span></span></span></li>
</ol>

<p><span><span><span><span><span>Financing a reverse &nbsp;exchange can be more difficult than a traditional loan, but it is common place for 1031s.&nbsp; Take the time and do the research by speaking with several banks and the right Qualified Intermediary - <a href="https://www.accruit.com/contact-us&quot; title="Start an Exchange with Accruit">Accruit</a>.</span></span></span></span></span></p>

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<p style="text-align:center"><a href="https://cta-redirect.hubspot.com/cta/redirect/6205670/07878ab4-b454-43a…; target="_blank"><img alt="Start Your 1031 Exchange with Accruit today" class="hs-cta-img" height="295" id="hs-cta-img-07878ab4-b454-43ab-90e0-95efb684dc56" src="https://no-cache.hubspot.com/cta/default/6205670/07878ab4-b454-43ab-90e…; style="border-width:0px;" width="801" /></a></p>

<p><span><span><span><span><span>In a hot market or market’s with limited inventory, the 45-day identification rules under a 1031 tax deferred exchange can feel like too small a window.&nbsp;<em><span>(To read more about 1031 exchange process and rules, visit our&nbsp;</span></em></span></span><span><a href="https://www.accruit.com/property-owners/1031-exchange-explained"><i><sp… explained</span></span></i></a></span><em><span><span>&nbsp;page)</span></span></em><span><span>&nbsp;Luckily, the&nbsp;</span></span><span><a href="https://www.accruit.com/blog/1031-like-kind-exchanges-myths-vs-realitie… exchange rules</span></span></a></span><span><span>&nbsp;provide for the ‘Reverse 1031 Exchange’ to exist. Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence, also approved by the IRS, is often referred to as a “</span></span><span><a href="https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex… 1031 exchange</span></span></a></span><span class="MsoHyperlink"><span><span><span><span>.</span></span></span></span></span><span><span>” The reverse exchange technique essentially consists of an exchange accommodator holding or “parking” title to the new property on behalf of the taxpayer to avoid the taxpayer having simultaneous ownership of two properties. Immediately after the sale of the old property (but no later than 180 days) the exchange accommodator transfers the new property to the taxpayer. This 'technically' creates the proper sequence. <b>Financing the Purchase of the Replacement Property</b></span></span></span></span></span></p>

<p><span><span><span><span><span>The concept of a Reverse 1031 exchange can sound attractive to many investors until the reality of financing the purchase of the replacement property is considered.&nbsp; For investors with the means to purchase the property outright in cash or those with strong lending relationships this can be relatively straightforward, however, for others they must ensure they take some nuances into consideration such as:</span></span></span></span></span></p>

<ol>
<li><span><span><span><span><span>The title to the replacement property will be parked with an entity created by the Qualified Intermediary for the sole purpose of holding title to the property.&nbsp; The loan cannot be in the name of the taxpayer, but instead must be in the name of the parking entity.&nbsp; This requires a short-term bridge loan that can be refinanced into a longer-term loan or paid down once the old property is sold and new property is transferred into the name of the taxpayer.&nbsp; Many banks will not entertain these loans as they do not fit into their traditional lending model.&nbsp; It may take some time discussing with several local or regional banks to get them to understand the structure.&nbsp; </span></span></span></span></span></li>
<li><span><span><span><span><span>Ensure you have sufficient collateral and equity.&nbsp; Banks will underwrite the replacement property as well as look at the taxpayers overall financial position to ensure adequate coverage.&nbsp; Traditionally, banks are willing to lend between 65-75% of the replacement property’s value to qualified buyers depending on the type of property and quality of collateral.</span></span></span></span></span></li>
<li><span><span><span><span><span>Think about financing well in advance of pursuing a purchase through a reverse 1031 exchange.&nbsp; Banks take time to order appraisals and underwrite collateral for specialty bridge financing.&nbsp; This can be several weeks.&nbsp; If you are in a rush and can’t wait for a bank, there are lenders willing to provide these types of loans, but you are going to pay handsomely for it in rate and upfront fees</span></span></span></span></span></li>
</ol>

<p><span><span><span><span><span>Financing a reverse &nbsp;exchange can be more difficult than a traditional loan, but it is common place for 1031s.&nbsp; Take the time and do the research by speaking with several banks and the right Qualified Intermediary - <a href="https://www.accruit.com/contact-us&quot; title="Start an Exchange with Accruit">Accruit</a>.</span></span></span></span></span></p>

<p>&nbsp;</p>
<!--HubSpot Call-to-Action Code -->

<p style="text-align:center"><a href="https://cta-redirect.hubspot.com/cta/redirect/6205670/07878ab4-b454-43a…; target="_blank"><img alt="Start Your 1031 Exchange with Accruit today" class="hs-cta-img" height="295" id="hs-cta-img-07878ab4-b454-43ab-90e0-95efb684dc56" src="https://no-cache.hubspot.com/cta/default/6205670/07878ab4-b454-43ab-90e…; style="border-width:0px;" width="801" /></a></p>