Types of 1031 Exchanges: A Visual Guide

Understand the four main 1031 exchange structures, their requirements, and which type fits your investment strategy

Whether you're planning your first 1031 exchange or exploring alternatives to the standard delayed exchange, this guide breaks down each type with clear timelines, requirements, and real-world examples.

Forward/Delayed Exchange

Most Common (80%+ of exchanges)

Delayed Exchange, Standard 1031 Exchange

How It Works

Sell Property
Day 0
45-Day ID
Identify
180-Day Close
Deadline
Buy Replacement
Complete

Sell your property being sold first, then identify potential replacement properties within 45 days and complete the purchase within 180 days. A qualified intermediary holds the sale proceeds during this period.

When It's Used

  • Standard real estate investment property sales
  • When you need time to find the right replacement property
  • When you have flexibility in your purchase timeline
  • Most traditional 1031 exchange scenario

Key Requirements

  • •Sell property being sold and transfer to qualified intermediary
  • •Identify replacement property within 45 days of sale (strict deadline)
  • •Close on replacement property within 180 days of sale (strict deadline)
  • •Replacement property must be equal or greater value
  • •Cannot touch sale proceeds (held by QI)
  • •Same taxpayer requirement maintained

Typical Timeline

Day 0
Close sale of property being sold
Day 45
Identification deadline (must submit list to QI)
Day 180
Exchange deadline (must close on replacement)
Complexity:
Medium
Cost:
Medium

Example Scenario

Sarah sells her $500,000 apartment building in March. Within 45 days (by mid-April), she identifies three potential commercial properties. By mid-August (within 180 days), she closes on a $600,000 retail building, completing her 1031 exchange and deferring all capital gains taxes.

Reverse Exchange

Reverse 1031, Parking Arrangement

How It Works

Buy Replacement
via EAT
180-Day Period
Sell current
Sell Property
Complete

Purchase your replacement property first (typically held by an Exchange Accommodation Titleholder), then sell your property being sold within 180 days. This reversed timeline requires financing both properties temporarily.

When It's Used

  • Competitive markets where ideal properties sell quickly
  • When you've found perfect replacement before selling current property
  • When seller won't wait for your 1031 timeline
  • When you need to act fast on opportunities (foreclosures, auctions)

Key Requirements

  • •Engage Exchange Accommodation Titleholder (EAT) to hold property
  • •Complete sale of property being sold within 180 days
  • •Arrange financing for both properties during overlap period
  • •Higher cash requirements and fees
  • •Identification requirements within 45 days (identifying what you'll sell)
  • •Complex documentation and loan qualification

Typical Timeline

Day 0
EAT purchases replacement property on your behalf
Day 45
Identify property you will sell
Day 180
Complete sale of property being sold and transfer title
Complexity:
High
Cost:
High

Example Scenario

Mark finds an ideal warehouse at auction that won't wait for his 1031 timeline. He engages an EAT to purchase the $800,000 warehouse. Over the next 150 days, Mark sells his current commercial property for $750,000, completing the reverse exchange and taking title to the warehouse.

Improvement/Build-to-Suit Exchange

Construction Exchange, Build-to-Suit

How It Works

Acquire Property
via EAT
Construction
1-180 days
Take Title
Complete

Acquire replacement property and use exchange funds to make improvements, renovations, or new construction before taking title. The Exchange Accommodation Titleholder holds property during construction, and all work must complete within 180 days.

When It's Used

  • When replacement property needs significant renovations
  • When you want to build custom improvements with exchange funds
  • When no suitable turnkey property exists
  • When maximizing value through property improvements

Key Requirements

  • •All improvements must be completed within 180-day window
  • •Exchange Accommodation Titleholder (EAT) holds property during construction
  • •Only the improved value qualifies for tax-deferral
  • •Detailed construction timeline and budget required
  • •Construction must be substantially complete
  • •Value of property + improvements >= property being sold value

Typical Timeline

Day 0
Sell property being sold / acquire replacement property via EAT
Day 90
Construction and improvements in progress
Day 180
Take title to improved property (deadline)
Complexity:
High
Cost:
High

Example Scenario

Jennifer sells her $1.2M apartment complex and purchases a $900,000 warehouse through an EAT. Over the next 160 days, she uses $400,000 in exchange funds to add climate control, renovate office space, and upgrade utilities. She takes title to the improved $1.3M property, deferring all capital gains.

Simultaneous Exchange

Rare in Practice

Same-Day Exchange, Direct Swap

How It Works

Sell & Buy
Same Day
Both Close
Simultaneous

Both the sale of your property being sold and purchase of replacement property close on the exact same day in coordinated transactions. A qualified intermediary still facilitates the exchange.

When It's Used

  • Direct property swaps between investors
  • When both closing dates perfectly align (rare)
  • When immediate exchange is necessary
  • Pre-arranged exchange agreements between parties

Key Requirements

  • •Both transactions must close on same calendar day
  • •Requires precise coordination between all parties (buyers, sellers, title companies)
  • •No 45-day or 180-day extension periods available
  • •Still requires qualified intermediary to avoid constructive receipt
  • •All documentation must be ready simultaneously
  • •High risk if either transaction delays
Complexity:
Medium
Cost:
Low

Example Scenario

Two investors agree to swap properties: Alex's retail building for Jordan's industrial warehouse. After months of planning, both transactions close on the same day with their qualified intermediaries facilitating the exchange. While structurally simple, the coordination required made this challenging.

Which Type Do You Need?

Still not sure which exchange type is right for you?

Contact a Qualified Intermediary