In a 1031 exchange, is it possible to sell your relinquished property first and then identify your new replacement property? The short answer is yes. You can fly by the seat of your pants and wait until day 44 in your identification period to really hone in on what you want to identify.
Do Your Homework Early
However, if you do your homework early, even before you sold your relinquished property and started to think about your replacement property options, you will benefit from that homework because it is a very tight market. If you want to go back into traditional brick-and-mortar property, it is a very competitive market and wouldn't it be nice to have a purchase agreement already in place on your replacement asset?
That way when you identify you have the certainty that you're going to be able to acquire it. It can't be sold out from underneath you because you have it under contract.
Many people get locked up with paralysis and they can't decide what to identify. Meanwhile all the other buyers in that Marketplace are gobbling up the available inventory. In places with very competitive real estate marketplaces people are making offers sight unseen at full price.
Think Like a Chess Player
You really need to think ahead like a chess player if you want to be able to navigate these issues. That said, you can wait until the 45th day do identify and designate your official 1031 exchange replacement property. But a pro tip is to plan ahead so that this is a less stressful process.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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