Question:
“I’d like to sell my rental and buy another property. I have 45 days after I sell to buy the next one, correct?”
Answer:
Not exactly.
You’re talking about what’s called a 1031 exchange, named after IRS Code Section 1031.
Contrary to popular belief, 1031 exchanges are fairly simple, with just a few rules to follow. A few of the rules related to your question are:
- When you close your sale, you can’t take possession of the money. It must be held by a neutral third party called an accommodator or intermediary.
- You have 45 days after closing the property you’re selling to “identify” the property(s) you plan to purchase. Identifying is simply notifying your accommodator which property(s) you plan to buy.
- You generally have 180 days after closing your sale property to close your purchase.
I have done many exchanges for myself, as well as many dozens for clients, so call me if you’d like to discuss.
Note: Please consult your tax professional.
