What is an Improvement Exchange?

An Improvement Exchange, also known as a "Build-to-Suit" or "Construction" exchange, is a type of like-kind exchange where an investor exchanges an existing property for a new property that is currently under construction or that is going to be built.

In this type of exchange, the investor will transfer the existing property to a Qualified Intermediary who will then sell the property and use the proceeds to purchase a new property that is currently under construction or that is going to be built. The new property can be a single-family residence, a multi-unit building, a commercial property, or an industrial property.

The main benefit of an Improvement exchange is that it allows the investor to defer paying taxes on the sale of their existing property and to acquire a brand new property that is customized to their specific needs and preferences. The exchange must comply with all the rules and regulations for like-kind exchanges set forth by the IRS, including the 45-day and 180-day identification and exchange periods.

However, due to the fact that the property is not yet built or completed, it can be considered a higher-risk and complex exchange, and it might need additional planning and coordination.