The 4 Professionals Who Should be on your 1031 Exchange Team

Mar 25, 2021

If you want to sell commercial real estate (CRE) using a 1031 exchange to defer all federal and state capital gains taxes, recapture depreciation, and increase your buying power, you will need a 1031 exchange team. There is no option for DIY here.

When utilizing the 1031 exchange, the IRS requires you to use a qualified intermediary (QI) for the transaction. However, you cannot use your QI solely for every part of the exchange process – you need others on your team.

Your 1031 Exchange Team of professionals should include:
  1. A commercial real estate broker/advisor with 1031 expertise who can help source the rest of your team, as well as lenders if needed.
  2. A 1031-certified, fidelity bonded qualified intermediary who is strategic and trustworthy; one who knows the most current codes and documentation and is a member of the FEA (Federation of Exchange Accommodators).
  3. An experienced attorney who can provide legal advice for this complex transaction.
  4. A tax specialist or CPA who understands the ins-and-outs of tax-deferred exchanges.

1. First Person on Your Team: a CRE Advisor with 1031 Expertise

When you invest in commercial real estate, especially triple-net (NNN) lease properties, it is imperative to know what is expected of you and how to go about making the most of the 1031 exchange. These transactions are complicated and fast-moving; leaving the process in the hands of inexperienced individuals could be costly.

The most efficient, least stressful way to perform a 1031 exchange is to engage a knowledgeable, highly experienced commercial real estate broker or net-lease advisor BEFORE you sell your rental home, apartment complex, office center, parcel of land, or other investment property. Since it’s critical to structure the exchange prior to closing on the sale of your property, your 1031 expert advisor will ensure you stay on track to meet the imposed deadlines, while ensuring your best interests are represented throughout the process.

Therefore, if you are contemplating putting an investment property on the market, Westwood Net Lease Advisors encourage you to contact us right away so we can help you start the 1031 exchange process before your investment property sells.

  • Proper planning and personal representation from the very beginning assure that when your property sells, you’re ready to identify a selection of replacement properties and get offers to the sellers, meeting the first 45-day requirement.
  • When we’re involved at the onset, we can help troubleshoot any potential issues early on.
  • We have a vast network of professionals should you need them. We align our clients with trustworthy commercial lenders, QIs, title companies, attorneys, CPAs, and tax professionals who can help get the transaction closed smoothly and on time.

Our job is to get you into your new property with relative ease while meeting the IRS’s 1031-exchange 180-day total transaction deadline so you can defer all capital gains taxes and build your wealth. When purchasing a property through a 1031 exchange or any other method, there is no charge for our services.

When you engage Westwood Net Lease Advisors, our comprehensive 1031 expertise will help you meet the IRS’s strict requirements and save you tens-of-thousands of dollars in capital gains taxes.

2. Engage a 1031 Qualified Intermediary

In collaboration with your CRE advisor, choose a 1031-trained, fidelity-bonded qualified intermediary (QI). Your QI should know the 1031 exchange thoroughly, especially recent changes that could affect your transaction, and alert you to any issues that might inhibit a successful 1031 exchange.

Once you and the buyer of your property agree to the terms of sale, a copy of the contract, along with the name and phone number of the attorney handling the transaction, will be sent to your chosen qualified intermediary. Your QI will then strategically drive your exchange forward by preparing and managing the documents to comply with safe harbor regulations, including the Escrow Account Agreement, Assignment of Contract, Exchange and Account Agreement, and Notification of Assignment while holding the sale proceeds in an FDIC-insured escrow account until the exchange is completed.

If you choose to work with a Westwood Net Lease Advisor, our referral network of qualified intermediaries is vast – we can assist you in finding one you can trust.

3. Involve an Experienced Attorney

While your QI may also be an attorney, he or she cannot offer legal advice on your current 1031 transaction, which makes a CRE attorney schooled in 1031 exchanges another critical team member. He or she can spot trouble, clear up any grey areas before they become legal issues, and ensure your transaction meets all legal requirements.

There is no limit to how many times you can use the 1031 exchange, which means you can potentially defer capital gains taxes indefinitely. This helps build greater wealth than if you were to pay those taxes each time.

4. Consult a Tax Specialist or CPA

It is vital to consult with a tax specialist or CPA who understands every detail of the 1031 exchange and how it relates to your financial needs and necessary outcomes. Involve your CPA in the early stages of selling your property and in your 1031 transaction, then continue to work with him or her throughout the selling/buying transactions. An informed CPA is imperative at tax time so you can maximize various tax opportunities and preserve capital.

When you work with a Westwood Advisor, we handle as much as we can legally handle on your behalf so there is less burden on you throughout the 1031 exchange transaction.

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To Wrap it Up – Fortify Your 1031 Team with Experts Before You Sell

If you want to perform a 1031 exchange in the near future, learn all you can and get the preliminary steps out of the way by working with a Westwood Net Lease Advisor before you list your property, then fortify your team with the additional 1031 experts listed in this article – a qualified intermediary, attorney, and CPA. This is your team, representing your best interests.

Westwood will ensure your entire 1031 transaction – from before the sale of property number one to closing on your next investment property – meets the IRS’s requirements and is done with integrity, ultimately deferring capital gains taxes, and helping you build wealth. Contact us today to learn more. There is no obligation, and our buyer advisory services are free. 314-997-5227


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