How much do 1031 exchange companies charge?

Question

What are the typical fees and costs associated with using a 1031 exchange company, and how do these charges impact the overall financial benefits of completing a 1031 exchange?

ARTE's Answer

The cost of a 1031 exchange can vary significantly depending on the complexity of the transaction, the location of the properties involved, and the services provided by the qualified intermediary (QI). Generally, fees for a standard 1031 exchange can range from $500 to $1,500 for straightforward transactions. More complex exchanges, such as reverse exchanges or those involving multiple properties, can incur higher fees, sometimes reaching several thousand dollars.

At Deferred.com, we understand that minimizing costs is crucial for investors looking to maximize their returns. That's why we offer a “No Fee Exchange” service, which can save you money compared to traditional QI services. By choosing us as your qualified intermediary, you can focus on the benefits of tax deferral without worrying about additional costs eating into your investment gains.

To illustrate how a 1031 exchange works and how our “No Fee Exchange” can benefit you, let's consider an example:

  1. Sale of Relinquished Property: You sell your California rental property for $500,000. Instead of receiving the proceeds directly, the funds are transferred to us at Deferred.com, acting as your QI.
  2. Identification Period: Within 45 days of the sale, you identify potential replacement properties. Let's say you identify a commercial property in Texas worth $550,000.
  3. Exchange Period: You have 180 days from the sale of your relinquished property to close on the purchase of the replacement property. You use the $500,000 held by us to purchase the Texas property, and you secure additional financing for the remaining $50,000.
  4. Completion of Exchange: By reinvesting the full $500,000 sale proceeds into the new property, you defer the capital gains tax on your $200,000 gain.

By using Deferred.com, you benefit from our “No Fee Exchange”, which means you don't incur the typical QI fees that can range from hundreds to thousands of dollars. This cost-saving measure allows you to allocate more resources towards your investment, enhancing your overall return.

It's important to note that while our “No Fee Exchange” covers the QI service fees, there may still be other costs associated with the transaction, such as closing costs, legal fees, and any financing-related expenses. However, by eliminating the QI fee, we help you keep more of your money working for you in your real estate investments.

Have more questions? Call us at 866-442-1031 or send an email to support@deferred.com to talk with an exchange officer at Deferred.

Deferred's AI Real Estate Tax Expert (ARTE) is a free research tool. Trained on 8,000+ pages of US tax law, regulations and rulings, ARTE outperforms human test takers on the CPA exam. This is page has ARTE's response to a common 1031 Exchange question and should not be considered personalized tax advice.

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