If you’re interested in completing a 1031 exchange, there’s a chance that the property you are looking to acquire needs a little TLC. Maybe that farmland needs some new buildings or that apartment complex could use some upgrades if you’re hoping to acquire some more tenants. Many properties that clients are looking to exchange into could use some upgrades and repairs, but can funds that you acquire from the transfer of one property in a 1031 exchange be put towards repairs on an acquired property?
1031 Exchanges And Repair Costs
If you want to construct improvements to you replacement property, you may be able to pursue an improvement exchange. This exchange allows you to pay for a replacement property’s improvement costs with some of the 1031 exchange funds. If you are considering this type of exchange, it’s imperative that you connect with a Qualified Intermediary to ensure everything is carried out as needed to avoid unexpected tax expenses down the road.
We’ll go over a real basic explanation of an improvement exchange below. Here’s what you’ll need to do in order to be eligible for an improvement exchange:
Specific planned improvements must be outlined in an Exchange Agreement between you and the Qualified Intermediary before you begin the exchange.
All improvements on the replacement property must be finished within 180 days of closing on the relinquished property.
If you are interested in possibly pursuing this type of exchange, or you want more information about your options when performing a standard 1031 exchange, look no further than the team at CPEC 1031. We’ve helped countless clients perform an exchange that helps them move into a new investment without incurring an unexpected tax burden, and we can do the same for you. For more information, or to talk with a member of our team, give us a call today at (612) 643-1031.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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