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Construction Exchange

You can make improvements to an existing property or build new property as part of a 1031 construction exchange. By partnering with 1031X, you can develop the property you want and leverage the power of tax deferral for new construction or improvements.

How does a construction exchange work?

A construction (or improvement) exchange allows you to repair, improve, or build new structures on new replacement property acquired through your construction 1031 exchange. This strategy is great for ensuring that your replacement property has enough value while still following the rules set by the Internal Revenue Service (IRS) regarding 1031 properties.

Generally, the IRS does not allow the direct use of 1031 proceeds to fund improvements. A construction 1031 exchange helps you safely operate within these rules.

A construction 1031 exchange on a property can help you make repairs and improvements — or build new structures — without directly using sale proceeds to pay for the upgrades. Here's the catch: Instead of holding the replacement property's title directly, your qualified intermediary will establish a new entity called an Exchange Accommodation Titleholder (EAT) to hold title in your place.

Why turn to 1031X as your qualified intermediary?

Construction or improvement exchange can be challenging to understand and, due to their complex nature, very few intermediaries handle them. At 1031X, our advanced exchange specialists have extensive experience working with clients on construction or improvement exchanges for replacement property. We'll take you through the process step-by-step to make it as easy as possible. With us, you gain:

a man in a business suit standing next to the 1031x logo

Construction lender management

We'll maintain contact with your lender throughout the process to ensure they understand your exchange.

Custom invoicing and draw strategy

Every 1031 exchange is different. At 1031X, we'll build a draw and invoicing strategy based on your project, timeline, and contractors.

Simple conversion from another exchange solution

If you suddenly find a reaplcement property that could benefit from improvements, 1031X can help. When you work with us, you can quickly convert between exchange types.

Automation

We automate as much as possible thorughout our construction exchange to reduce confusion, clerical errors, and time delays.

Flat rates

Every service at has a simple, up-front fee structure. Receive the help that you need without worrying about unexpected costs.

Where does 1031X come in?

Qualified intermediaries are a must for any exchange, and 1031X handles the job. As a qualified intermediary, we establish the EAT for your construction exchange. An EAT is a brand new limited liability company that:

  1. Borrows the purchase and improvement funds necessary to capture the property you want to develop, 
  2. Takes title to the property while improvements are made,
  3. Transfers the property to you to complete the exchange. 

You will have 180 days to complete the entire 1031 process, beginning from the EAT purchase through to the completion of the exchange.

As a qualified intermediary, 1031X can handle the exchange process (and 1031 rules) while you focus on the home improvements. Once everything is ready, we’ll ensure the property transfer goes smoothly. After the process is complete, you’ll have total ownership of your property.

You’ll have a dedicated and experienced exchange officer. Your officer will maintain communication with the EAT, lenders, and other involved parties to keep everyone on the same page. In our experience, this kind of individualized attention is key to navigating a successful construction exchange.