1031 Exchanges
Delayed 1031 Exchange
Sell first, then buy: the standard exchange structure. Your qualified intermediary needs to be in place before your relinquished property sale closes.
Exchange type
Delayed Exchange
Key deadlines
45-day identification and 180-day completion
Our role
Qualified intermediary (QI)
Last updated
What is a delayed 1031 exchange?
A delayed 1031 exchange is the structure most of our customers use: you sell your relinquished property first, then buy your replacement property within the deadlines. Your qualified intermediary holds your sale proceeds so you never take receipt of the funds. You have 45 days from your sale closing to identify your replacement property in writing, and 180 days to close on it. The rules are strict, so confirm the details with your CPA, tax attorney, or qualified intermediary.
A delayed 1031 exchange, sometimes called a forward or Starker exchange, is the structure most Texas investors use. You sell your relinquished property, your proceeds go to your qualified intermediary, and you then acquire like-kind replacement property within the IRS deadlines.
It works when your sale closes before your purchase and you can identify a replacement property quickly. The most important move happens before you sell: your qualified intermediary has to be in place before your relinquished property closes, because once you take receipt of the proceeds your exchange is over.
When a Delayed Exchange Makes Sense
- You are selling one investment property and buying another in Texas
- You have a clean sale-then-purchase timeline with no rush to close the purchase first
- You can identify candidate replacement properties within 45 days
- You want to defer gain and roll your equity into a larger or better-positioned property
When This Structure Can Be Risky
- You cannot find or identify a replacement property within 45 days
- Financing on your replacement property is not lined up and may not close by day 180
- You misunderstand the identification rules and over-identify or under-identify
- You need to close on your replacement before your sale closes - a reverse exchange may fit better
How a Delayed Exchange Works
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Engage your qualified intermediary first
Set up your QI and exchange documents before your relinquished property closes. This step cannot be added after you receive your proceeds.
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Sell your relinquished property
Your sale closes and your 45-day and 180-day clocks both start. Your proceeds go to your QI, not to you.
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Identify your replacement property (45 days)
Identify candidate replacement property in writing within 45 days, following the IRS identification rules.
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Close on your replacement (180 days)
Acquire your identified replacement property within 180 days of your sale closing, using the funds your QI holds.
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Complete your exchange
Your QI applies your exchange funds to the purchase and your replacement property transfers to you.
The 45-Day and 180-Day Rules
- Your 45-day identification period and your 180-day completion period both start the day your relinquished property sale closes, and they run at the same time.
- Identification has to be in writing and follows IRS rules. Two common ones are the three-property rule (identify up to three properties of any value) and the 200 percent rule (identify any number of properties as long as their total fair market value does not exceed 200 percent of your relinquished property value).
- Your replacement property has to be like-kind real property held for investment or business use.
- You cannot take actual or constructive receipt of your proceeds. Your qualified intermediary holds them throughout the exchange.
- The deadlines are strict and are not extended for financing or closing delays. Confirm your specific facts with your CPA, tax attorney, or qualified intermediary.
Sources: IRS - Like-Kind Exchanges (Real Estate Tax Tips) , IRS - Instructions for Form 8824 (Like-Kind Exchanges)
Common Delayed Exchange Mistakes
- Closing your sale before your qualified intermediary is in place
- Taking actual or constructive receipt of your sale proceeds
- Missing your 45-day identification window
- Using vague identification language or ignoring the identification rules
- Not lining up replacement property financing in time for your 180-day deadline
How Cedar Top Helps Texas Investors
Cedar Top Lending can act as your qualified intermediary on a delayed exchange, holding your exchange funds and preparing your exchange documents so you never take receipt of the proceeds. We do not provide tax or legal advice, and we do not decide whether your transaction qualifies. That is for your CPA, tax attorney, and tax advisor.
- Act as your qualified intermediary and hold your exchange funds
- Prepare your exchange documents and coordinate with your closers
- Track your 45-day identification and 180-day completion deadlines
- Coordinate with your CPA, attorney, title company, and real estate agents
- We can lend on your replacement property too
Related financing: Bridge Loans and New Construction Loans .
Set up your exchange before your relinquished property closes. Talk with us about acting as your qualified intermediary and about financing your replacement property.
Delayed 1031 Exchange FAQs
When do the deadlines start?
Both your 45-day identification period and your 180-day completion period begin on the date your relinquished property sale closes. They run at the same time, so the 45-day window sits inside the 180-day window.
Can I touch my sale proceeds?
No. To keep your 1031 exchange intact, your qualified intermediary holds your proceeds, and you cannot take actual or constructive receipt of them. Confirm the specifics with your tax advisor.
When do I need to set up my qualified intermediary?
Before your relinquished property closes. Your QI and exchange documents need to be in place before the sale, because once you receive the proceeds your exchange is over.
How many replacement properties can I identify?
IRS rules limit identification. Two common ones are the three-property rule and the 200 percent rule. Because the rules are technical, confirm how they apply to your situation with your CPA or tax attorney.
What is like-kind property?
For real estate, like-kind is broad: most real property held for investment or business use can be exchanged for other such real property. It does not have to be the same type of property. Your tax advisor can confirm whether a specific property qualifies.
Can Cedar Top help finance my replacement property?
Yes. We lend on Texas investment property, so the same team can be your qualified intermediary and your bridge lender on your replacement property. We do not provide tax or legal advice.
What happens if I miss the 45-day or 180-day deadline?
Missing a deadline typically ends the exchange, which can make the gain taxable. The deadlines are not extended for financing or closing delays, so plan your timeline carefully with your advisors.
Start Your Texas 1031 With Cedar Top
We help you get set up for your exchange. Remember to involve your CPA, attorney, and tax advisor.