Real estate investors seeking to preserve the value of their assets, may find a 1031 exchange an excellent solution. With a 1031 exchange, owners of investment real estate can defer capital gains tax by selling one property and replacing it with a similar one. The requirements to successfully accomplish this are complex and it is important to find a trusted 1031 exchange specialist to guide you through the process. Here are seven steps to ensure you choose wisely.

  1. Determine the complexity of your exchange. There are several factors that contribute to the intricacy of your transaction, including timing, valuation, and the use of the properties. Make sure you understand what your transaction entails before choosing your service. It may well be that you need additional services, such as 1031 exchange brokers, financial services, or escrow services.
  2. Does the service you are considering have a trained and certified 1031 exchange specialist on staff? Because 1031 exchange transactions are intricate and can vary substantially from deal to deal, it is critical to know that your service has professionals on hand to sort through anything that arises.
  3. Do you need help selling or finding an acceptable replacement? You will want to find a service that includes 1031 exchange brokers in their resources. These professionals can use the same marketing and research materials that a Realtor has, which helps ensure that your transaction is financially successful.
  4. Do you need help reviewing the legal and transactional documents related to your exchange? You will want to find a service that has the legal expertise to help you. Review of transactional documents is different than processing the paperwork related to 1031 exchanges, and many services do not have the 1031 exchange specialists help with the review.
  5. Research the service you are considering. You want to fully understand their transactional expertise, their range of experience, and services they will provide. Ask for references as part of your due diligence.
  6. Inquire as to the service’s method for safeguarding your funds which they will hold during the 1031 exchange period. They should have adequate controls and processes over their fund management to ensure that they will remain safe and intact throughout the whole transaction.
  7. Ask Questions. The 1031 exchange specialist that you choose will be partnering with you on an important deal. If you don’t feel confident in their ability to promote your best interests, they are not the right choice for you.

The regulations for a 1031 exchange are complex and one mistake could result in your 1031 exchange being disallowed and you paying significant additional taxes. The right 1031 exchange service will guide you through the entire process with confidence.