As a reputable 1031 exchange intermediary, we often receive inquiries about the timing of purchasing replacement property in relation to the sale of the relinquished property. The short answer is yes, you can purchase the replacement property before selling your relinquished property, but there are certain rules and regulations you must follow to ensure that your exchange remains valid.
Firstly, you must identify the replacement property within 45 days of the sale of the relinquished property. This means that you must provide a written description of the replacement property to us within this timeframe. Additionally, you must acquire the replacement property within 180 days of the sale of the relinquished property. If you fail to do so, your exchange will be disqualified, and you will be liable for paying taxes on any gains from the sale of your relinquished property.
It’s important to note that if you purchase the replacement property before selling your relinquished property, you will need to use other funds to make the purchase. You cannot use the proceeds from the sale of the relinquished property to purchase the replacement property directly. Instead, you will need to use a qualified intermediary, like ourselves, to hold the proceeds from the sale of the relinquished property until the replacement property is acquired.
In conclusion, purchasing replacement property before selling your relinquished property is possible under 1031 exchange rules, but it requires careful planning and adherence to strict guidelines. As your trusted 1031 exchange intermediary, we can assist you with navigating the process and ensuring a successful exchange.