Construction 1031 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 1031 exchange work?
A construction (or improvement) exchange allows you to repair, improve, or build new structures on new replacement property acquired through your 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 1031 construction exchange helps you safely operate within these rules.
A 1031 construction 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 exchanges 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 exchanges. We'll take you through the process step-by-step to make it as easy as possible. With us, you gain:
Construction lender management
We'll maintain contact with your lender throughout the process to ensure they understand your construction exchange.
Custom invoicing and draw strategy
Every construction 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 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. We establish the EAT for your construction exchange. An EAT is a brand new limited liability company that:
- Borrows the purchase and improvement funds necessary to capture the property you want to develop,
- Takes title to the property while improvements are made,
- 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.
1031X can handle the construction 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.
Contact 1031X for a free consultation
Are you ready to increase your replacement property's value? We provide construction exchange consultations to help investors optimize the value of replacement properties while deferring capital gains tax and recaptured depreciation tax. If you're ready to start your exchange process, call 888-899-1031 or reach out online to request a free construction exchange consultation.
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