1031 Exchange Risk Reduction Checklist

Diagram illustrating the 1031 exchange risk reduction process

Most 1031 exchanges fail or become “nightmares” because the investor has to manage multiple different vendors. We do not just sell replacement properties, we provide a closed-loop lifecycle, you supply the capital and we do the rest.

Our team provides a complete lifecycle process, from replacement property identification and validation to inspection, renovation, and management. Property management is handled by a trusted property manager who provides special low rates and services to our clients and currently manages more than 250 of our clients’ properties.

Phase 1: Before Listing Relinquished Property

  • [ ] Select a qualified intermediary and local investment team

  • [ ] Decide on the listing price and probable time to get the property under contract

  • [ ] Calculate the exact target purchase price for the replacement properties to ensure the total “debt + equity” matches or exceeds the relinquished property.

  • [ ] Entity Verification: Confirm that the legal entity selling the relinquished property is the exact same entity purchasing replacements (IRS requirement).

  • [ ] Confirm your lender can handle multiple simultaneous closings. Many lenders have limits on “total financed properties” for a single borrower. Many clients choose to use DSCR loans if conventional financing is not available.

  • [ ] Understand the 200% and 95% identification rules from the QI.

  • [ ] Identify a landlord insurance policy provider for the new portfolio rather than individual policies to minimize insurance costs.

Phase 2: After Relinquished Property Contingencies Are Cleared

  • [ ] Put replacement properties under contract, and identify backups in case any property falls out to satisfy the 200% rule.

  • [ ] Appraisal Contingency: Ensure that the appraisals on all replacement properties are complete.

  • [ ] Title/Lien “Quick-Scan”: A preliminary title search on all replacement properties before the relinquished property closes to ensure no “unsolvable” title issues exist.

  • [ ] Our team manages systems and cosmetic inspections

  • [ ] Our team builds a detailed renovation scope with costs for each property

  • [ ] Compare the actual acquisition costs of the replacement properties against the estimated tax-mitigation goal.

  • [ ] The team will consolidate the closing statements for your CPA

Phase 3: After Close of Relinquished Property

  • [ ] Close on replacement properties, typically within the first 14 days after the 45 day identification period begins.

  • [ ] Renovation starts immediately after close. We have a dedicated team member who manages all renovations and keeps you informed with video updates.

  • [ ] The team hands off properties to the property manager promptly after renovations and marketing photos are complete.