Capital 1031 Services

CONSTRUCTION EXCHANGES
The construction exchange allows an investor, through the use of a Qualified Intermediary, to make improvements on a replacement property using exchange equity. In other words, an investor can maximize investment opportunities using tax-deferred dollars while building or improving new investment property. This type of exchange is also referred to as an “improvement” or “build-to-suit” exchange. Many investors find that they want to buy a property under construction, or in need of renovation, but the property is valued too low based upon it being incomplete. By doing a construction exchange, the improvements completed in the 180 day period can be included as part of the replacement property purchase price.

Benefits Of The Improvement Exchange
Improvement exchanges offer an Exchanger a wide array of benefits which often result in a better investment than properties readily available on the open market. The ability to refurbish, add capital improvements, or build from the ground up, while using tax deferred dollars, can create tremendous investment opportunities. Due to the additional options provided by this variation and because the 1991 Treasury Regulations and Rev. Proc. 2000-37 established parameters for improvements to be produced, improvement exchanges continue to become more common.

Another benefit is that the new replacement property does not necessarily have to be fully completed within the 180 day exchange period. A certificate of occupancy is not required.