Build Your Estate Through

1031 Exchanges

How A 1031 Exchange Works

For your 1031 Exchange, you need to follow these steps:

Step One:

While contemplating the sale of an investment property, contact Meridian Pacific Properties

When contemplating the sale of an investment property. Contact Meridian Pacific Properties immediately to help answer any questions you have about doing a 1031 Exchange.

Step Two:

Enter into a contract and open escrow

When you reach an agreement to sell your investment property and enter into a contract and open escrow, make Meridian Pacific Properties your first call to get the 1031 Exchange process started.

Step Three:

Identification Period

On the actual date of the sale of your relinquished property, the 45-day identification period begins to identify the next property you want to exchange into. Additionally, the 180-day exchange completion timeline begins as well.

Step Four:

Finalize Exchange

Once you open escrow on the property you’re exchanging into, contact Meridian Pacific Properties to help you finalize the exchange.

Step Five:

Enjoy a fully tax-deferred exchange

Meridian Pacific Properties will provide you with the necessary tax documents to file your taxes the following year, so you can enjoy a fully tax-deferred exchange.

Benefits of 1031 Exchange

Are you a real estate investor looking for a convenient way to save on your tax bills? Then, you will be happy to employ this tax reduction strategy that allows you to defer the amount you owe on tax. However, it is necessary to understand the working principles of the 1031 exchange and how it can lead to successful real estate investing and expand your portfolio.

The 1031 exchange allows taxpayers to postpone the capital gains taxes on the sale of a house if they buy a new one within a timeframe. This tax-deferred procedure can be useful to any taxpayer who is looking to sell their current property and purchase a new one. Aside from this great advantage, there are other benefits of a 1031 exchange.

  1. Opportunity to diversify a portfolio and expand

Contrary to what most people think, 1031 exchange is a legal strategy that allows you to reinvest the proceeds from the sale of your property and postpone capital gains taxes by buying “like-kind” properties within a set period. For many investors, this is the best way to diversify their portfolio, grow wealth, and generate more returns over time. An investor can exchange a single-family apartment in a highly favored market such as Los Angeles for many rental properties in a less exorbitant city and less volatile market, leading to a better cash flow.

  1. Avenue to explore new markets

The biggest benefit of investment real estate is the diversification of risk. 1031 exchange provides enough grounds to capitalize on this advantage. Knowing full well that the 1031 exchange can be executed anywhere in the country, an investor can exchange to enter markets with high growth potentials, thereby earning big returns. Remember that the payment of state capital gains taxes is variable from one state to the other.

  1. A tool to have more investing capital

Tax savings entail having more disposable cash for investing in other assets. This cash can act as a down payment for the exchange of high-value and more expensive replacements. This will eventually lead to more cash flow and increased capital investment.

MEMPHIS MARKET UPDATE - Q3 2022

November 3, 2022 at 10:00 AM PST
LIVE WEBINAR

Jeff King (Co-Founder and Principal), Kent Coykendall (President), Brian Conlon (Business Development), & Wendy Dube (Client Service)

Get the latest update on the Memphis real estate market in our next investor webinar.

What we Offer

Direct Ownership

Direct ownership and control of the assets.

Flexibility to Liquidate

Sell when you want. Typically in just 60 - 90 days.

More Cash Flow

Ability to leverage the assets for higher cash flow and IRR.

Not Accredited?

Available to both accredited and non-accredited investors.

Low Risk

Low risk and high returns with 5% - 7% Cap Rates.

Easy Process

Our turnkey process rivals the simplicity of a DST.

Why Meridian?

Meridian Pacific Properties is a pioneer in Built-to-Rent investment properties. We are thought leaders with a long history of proven success.
0

PROPERTIES UNDER 
MANAGEMENT

0

Homes Built In 2022

0
INVESTOR CLIENTS

Build Your Estate With Meridian Pacific Pros

There are several ways to build estate. Investing in real estate is one way. Careful consideration should be given when selecting the types of properties to include in a real estate portfolio. Similarly, moving to another investment property requires similar considerations. Unfortunately, many do not take advantage of another method left to them to help them grow their portfolio faster – the tax-deferred exchange.

The tax deferred exchange allows an investor to defer paying capital gain taxes on the sale of investment real estate. Conversely, an investment that is sold without a tax deferred exchange can force the seller to pay up to 25% to 30% of their gain in taxes. If you’re planning to purchase another investment property then it only makes sense to do an exchange, because it gives you more money to use on the purchase of your next property. Put your money to work for you by choosing to do a 1031 tax deferred exchange today.

NON-EXCHANGE TREATMENT

EXCHANGE TREATMENT

1031 Exchange FAQs

WHY DO INVESTORS USE A 1031 EXCHANGE IN REAL ESTATE?

Use of a 1031 exchange enables investors to keep a significantly greater amount of their capital invested and generating returns, since payment of the tax liability is deferred.

A 1031 exchange in real estate is fairly straightforward to accomplish. Section 1031 of the Internal Revenue Code lays out the guidelines that must be followed to execute a 1031 exchange. While there are a number of categories of assets that can be transacted under a 1031 exchange, the information that follows pertains only to real estate investment property.

Investors over the years have turned to Meridian to help them develop a strategy for improving the returns on their investment properties. Meridian can help with a real estate 1031 Exchange in several ways.

  • We help our clients to quickly identify and acquire top-quality replacement properties that deliver superior returns on investment.
  • Meridian has already performed the due diligence on the city, the neighborhood, and the properties themselves so that the investor does not have to.
  • The properties come with all renovations completed, with tenants and experienced property management already in place. Meridian’s replacement properties are already performing when they are sold.
  • In most cases we are able to close properties quickly on short notice if necessary, and have access to lenders who finance investment properties.
  • Meridian is not a Qualified Intermediary (QI), but works with Qualified Intermediaries like 1031 Exchange Advantage in San Diego, CA.

 

WHAT IS THE TIMELINE AND WHAT ARE THE KEY DEADLINES IN A 1031 EXCHANGE?

During the identification period, the investor has exactly 45 days from the date his or her relinquished property has sold to identify in writing the replacement property or properties to be purchased. Identification usually consists of an address and/or legal description. There is no extension of the 45 day deadline under any circumstances. This 45 day timeline is step one of the requirements of the 1031 exchange rules.


Identification Period
During the identification period, the investor has exactly 45 days from the date his or her relinquished property has sold to identify in writing the replacement property or properties to be purchased. Identification usually consists of an address and/or legal description. There is no extension of the 45 day deadline under any circumstances. This 45 day timeline is step one of the requirements of the 1031 exchange rules.

 

EXCHANGE PERIOD

The second stage of the like kind exchange is the exchange period, which is the time frame in which the investor must receive (or close escrow) on the 1031 Exchange replacement property. This period ends at exactly 180 days after the date on which the person receives the relinquished property, or the due date for the person’s tax return for that taxable year in which the acquisition of the relinquished property has occurred, whichever occurs first. In the latter instance, an investor can always file for an extension on his or her tax return, in which case the exchange period would still be 180 days.

Violation of either the identification or the exchange periods will result in the invalidation of the 1031 exchange, and the investor must pay the taxes due on the capital gain. Therefore it is important for the investor to not wait until the last minute to either identify or close escrow on the replacement property to stay within the 1031 tax exchange rules.

HOW DO I KNOW IF A 1031 EXCHANGE IS RIGHT FOR ME?
A 1031 exchange is the act of making a like­kind trade of two assets using certain IRS 1031 exchange rules. Under certain conditions, you can defer capital gains tax payments. This applies to different categories of asset exchanges, but one of the most common is real estate transactions.
Current 1031 Exchange Information ­­ Frequently Asked Questions
If you are considering a 1031 exchange, you probably have quite a few questions. Here are the answers to some of the most important IRS 1031 exchange rules.
What type of assets qualify for a like-­kind exchange?
Any two properties that are set aside for business or investment use qualify for a 1031 exchange. The assets also are supposed to be equal in nature, character or class. However, the quality of the two pieces of real estate does not matter, and they do not have to be identical. Any two properties that are set aside for business or investment use qualify for a 1031 exchange. The assets also are supposed to be equal in nature, character or class. However, the quality of the two pieces of real estate does not matter, and they do not have to be identical.
Who qualifies for a 1031 Exchange?
Usually, business or investment property owners can make a 1031 trade. This includes owners of a sole proprietorship, C Corporation, S Corporation, trust or partnership. Any other taxpaying entity such as a limited liability company also can set up a like­kind business or investment property trade.
Are there any time limits for making a like-­kind exchange?
In order to avoid a capital gain tax, you must identify a potential replacement property with 45 days of selling a relinquished property. The replacement real estate identification must be documented in writing, and this includes a legal description, street address, or distinguishable property name. You also have up to 180 days after the sale of an exchanged property to receive the replacement real estate. Otherwise, you will be subject to capital gain taxes.
What types of like­-kind exchanges can be made?
According to the Like­Kind IRC IRS 1031 exchange rules, you can choose between three types of like­kind transactions. IRS documentation further explains the differences between three 1031 exchange structures: simultaneous, deferred and reverse. The simultaneous exchange is the swapping of two properties at the same time. Deferred exchanges allow you to surrender your real estate and later replace it according to IRS 1031 guidelines. A reverse exchange, on the other hand, allows you to acquire a replacement property through a like­kind accommodation titleholder. This real estate is then parked for up to 180 days during which time the taxpayer disposes of the relinquished property.
What types of like­-kind exchanges can be made?
According to the Like­Kind IRC IRS 1031 exchange rules, you can choose between three types of like­kind transactions. IRS documentation further explains the differences between three 1031 exchange structures: simultaneous, deferred and reverse. The simultaneous exchange is the swapping of two properties at the same time. Deferred exchanges allow you to surrender your real estate and later replace it according to IRS 1031 guidelines. A reverse exchange, on the other hand, allows you to acquire a replacement property through a like­kind accommodation titleholder. This real estate is then parked for up to 180 days during which time the taxpayer disposes of the relinquished property.
WHAT IS AN EXAMPLE OF A 1031 EXCHANGE?
Meridian has a track record of helping investors identify, analyze and close successfully on 1031 exchange properties which offer:
  • Stable Returns in Quality Neighborhoods
  • Turnkey Investments with Affordable Entry Prices
  • Easy Due Diligence with Fast, Non-Competitive Closings
  • Professional In-House Property Management
  • Capital Reallocation for Increased Investor ROI
  • Cash & Mortgage Boot Solutions
We partner with 1031 Exchange investors and accommodators to find 1031 exchange replacement properties to improve cash flow in a full reallocation or make use of any remaining boot leftover in during an exchange. Below are two like kind 1031 exchange examples which so how an investor can take the proceeds from a sale and use them to identify and acquire 1031 exchange properties.
RESIDENTIAL 1031 EXCHANGE EXAMPLE

Not sure how to do it on your own?
Send A Message

Whether you’re ready to sell today or in the future, we are happy to answer any questions you may have about your real estate portfolio.

Email, call, or fill out the form below to get in touch. If you already have a property and are ready to start an exchange process now, click here.