Exchange Types

Different 1031 Exchange methods apply to different goals and investors. It is important to know which method best fits your current and projected financial situation. Speaking with a qualified intermediary may be the most effective way to determine which exchange is best for you. Use the information on this page for a big-picture overview of each method.

Forward (Delayed) Exchange

This type of exchange is the most popular and for good reason. In a Forward Exchange, you simply sell what property you have (“relinquished property”) and replace it with a similar type of property (“replacement property”). In the industry, this type of exchange is known as the “1031 Exchange,” originally titled the “Starker Exchange.” 

Benefits: Without question the most popular option, allows you a maximum of 180 days to buy your replacement property. 

Reverse Exchange

In a Reverse Exchange, you acquire your new property (“replacement property”) before selling your current property (“relinquished property”). In other words, you close on your replacement property before finding a buyer for your relinquished property. 

Benefits: This option can be capital intensive, but it enables you to solve transactions that may be impossible otherwise.

Improvement Exchange

An Improvement Exchange allows you to use your 1031 Exchange proceeds to buy and improve the replacement property. 

Benefits: May reduce on replacement property acquisition costs, as well as improvement fees. 

Simultaneous Exchange

The oldest method of performing a 1031 Exchange, the Simultaneous Exchange occurs when you dispose of your old property (“relinquished property”) and immediately acquire your new property (“replacement property”). This option is also known as a Concurrent Exchange. 

Benefits: This option is typically quicker than other types of exchanges, not commonly used today, but was popular prior to the Starker Case.

Build-to-Suit 1031 Exchange

This type of exchange is similar to the Improvement Exchange in that it allows you to build or improve upon your replacement property with proceeds from the sale of your relinquished property. A Build-to-Suit Exchange can help drive up the value of your replacement property and maximize your investment. 

Benefits: May reduce costs and combines different types of exchanges for maximum profit.

By speaking with a qualified expert or intermediary, you can explore these options in greater depth—and possibly combine them to maximize your investment. Determining which type of exchange will work for you.  This can involve many factors and considerations, if you have partners involved, if you’re a new investor, if you want a qualified intermediary’s support, and other factors. You may also qualify for modified exchange types such as the Delayed Exchange, which have seller carry-back financing. 

To learn more about which 1031 Exchange options are right for you, contact Prime West Exchange, Inc. by phone at (818) 442-2228.