1031 Exchange Risk Reduction Checklist

Most 1031 exchanges fail or become “nightmares” because the investor has to manage multiple different vendors. We do not just sell replacement properties, we provide a closed-loop lifecycle, you supply the capital and we do the rest.

Our team provides a complete lifecycle process, from replacement property identification and validation to inspection, renovation, and management. Property management is handled by a trusted property manager who provides special low rates and services to our clients and currently manages more than 250 of our clients’ properties.

Phase 1: Before Listing Relinquished Property

• [ ] Select a qualified intermediary and local investment team

• [ ] Decide on the listing price and probable time to get the property under contract

• [ ] Calculate the exact target purchase price for the replacement properties to ensure the total “debt + equity” matches or exceeds the relinquished property.

• [ ] Entity Verification: Confirm that the legal entity selling the relinquished property is the exact same entity purchasing replacements (IRS requirement).

• [ ] Confirm your lender can handle multiple simultaneous closings. Many lenders have limits on “total financed properties” for a single borrower. Many clients choose to use DSCR loans if conventional financing is not available.

• [ ] Understand the 200% and 95% identification rules from the QI.

• [ ] Identify a landlord insurance policy provider for the new portfolio rather than individual policies to minimize insurance costs.

Phase 2: After Relinquished Property Contingencies Are Cleared

• [ ] Put replacement properties under contract, and identify backups in case any property falls out to satisfy the 200% rule.

• [ ] Appraisal Contingency: Ensure that the appraisals on all replacement properties are complete.

• [ ] Title/Lien “Quick-Scan”: A preliminary title search on all replacement properties before the relinquished property closes to ensure no “unsolvable” title issues exist.

• [ ] Your team manages systems and cosmetic inspections

• [ ] Your team builds a detailed renovation scope with costs for each property

• [ ] Compare the actual acquisition costs of the replacement properties against the estimated tax-mitigation goal.

• [ ] The team will consolidate the closing statements for your CPA

Phase 3: After Close of Relinquished Property

• [ ] Close on replacement properties, typically within the first 14 days after the 45 day identification period begins.

• [ ] Renovation starts immediately after close. We have a dedicated team member who manages all renovations and keeps you informed with video updates.

• [ ] The team hands off properties to the property manager promptly after renovations and marketing photos are complete.