You’ve heard the pitch: sell, swap, defer
The 1031 exchange sounds almost too good to be true. Sell an investment property, reinvest in another, and defer the capital gains tax? That’s legal?
Yes. Welcome to one of the IRS’s most powerful wealth-preservation tools.
But here’s the thing: the IRS may allow it, but they’re not handing out do-overs if you mess it up. That’s why working with knowledgeable 1031 exchange advisors is critical—and asking the right questions up front is how you separate the pros from the paper-pushers.
Why You Need a Specialist—Not Just Your Accountant
1031 exchanges are part tax law, part real estate strategy, part project management. That’s a strange Venn diagram. And it’s not something every CPA or real estate attorney handles regularly.
Experienced 1031 exchange advisors live in that complexity. They understand:
- IRS timelines and rules
- The subtle structuring moves that maximize value
- How to coordinate all parties (you, your QI, your title company, your next seller)
So before you hire, quiz them. Here’s what to ask—and why the answers matter.
1. “How Many 1031 Exchanges Have You Personally Handled?”
The IRS doesn’t require a license to call yourself a 1031 expert. That means it’s up to you to gauge their experience level.
You want someone who’s completed dozens—ideally hundreds—of exchanges. Bonus points if they’ve worked with properties like yours: commercial, multifamily, raw land, vacation rentals, etc.
A seasoned advisor won’t just recite the rules—they’ll tell you where investors most often mess up and how they helped avoid it.
2. “Do You Work With a Qualified Intermediary (QI) Directly?”
A 1031 exchange cannot happen legally without a QI. This third-party holds your sale proceeds so they don’t touch your hands (which would trigger a taxable event).
Ask:
- Do you have a preferred QI or vet them for clients?
- Can you explain how the money flows?
- How fast can the QI act if timelines are tight?
The QI relationship can make or break your transaction. An advisor who collaborates closely with trusted QIs saves you time—and serious stress.
3. “What’s Your Approach to Replacement Property Selection?”
Sure, you can exchange your office building for a strip mall. Or farmland. Or even a Delaware Statutory Trust (DST).
But should you?
A strong advisor helps you identify suitable replacement properties based on your goals, not just IRS guidelines. That might include:
- Assessing risk tolerance and diversification
- Matching depreciation strategies to income needs
- Navigating passive vs. active ownership options
If the advisor only talks about compliance and not strategy, you’re getting half the value.
4. “How Do You Handle the Timeline Pressure?”
Here’s where most exchanges fail: the clock.
You have:
- 45 days to identify potential replacement properties
- 180 days to close on one
No exceptions. No extensions.
Ask how your advisor:
- Prepares you to move fast
- Coordinates with realtors and sellers
- Helps build a list of backup properties
- Advises on reverse or improvement exchanges (for complex cases)
You want someone who’s as obsessed with the calendar as you are with ROI.
5. “What Happens If I Don’t Use All the Proceeds?”
Spoiler: if you don’t reinvest 100% of your sale proceeds—or if you don’t match or exceed the value of your relinquished property—you’ll owe taxes on the difference. It’s called “boot,” and it bites.
A savvy advisor helps you:
- Strategically reinvest all funds
- Plan for any unavoidable boot
- Model the after-tax implications before you commit
Final Thought: Don’t Trust Your Legacy to Google
Yes, 1031 exchanges can be brilliant. But they’re not DIY.
They’re built for investors who think long-term—and who value expert guidance when it counts.
So ask the questions. Dig into the answers. And choose 1031 exchange advisors who offer more than compliance—they offer confidence.
Because one smart property swap could define your portfolio. But only if you get it right.
