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1031 Exchange tips - Exchange with property improvements
Build To Suit
What happens when you cannot find a replacement property that is worth the same price of what you sold in a 1031 exchange? One option is to make improvements to the property being purchased. You can literally build the property to suit your needs or the needs of a potential tenant.
Essentially, you can use exchange funds to pay for the improvements made to the property that can be accomplished before the 180th day of the exchange. It is almost that simple if you are only dealing with a sale that is free and clear. The only factors that can complicate this have to do with debt and lending issues.
 
The Process?
In simple terms, the Qualified Intermediary (QI) steps into title during the initial purchase, acts as a general contractor to facilitate the payment of improvements, repairs, and even some personal property that is added property. Then, as soon as the work is completed, or we reach the 180th day, that improved property is conveyed to the exchanger to complete the purchase leg of the exchange.
 
What Improvements Can Count?
Virtually any capital improvements can count towards the value being added to the property. The ... more

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