In today's video, I want to share a real-life story that highlights a crucial lesson about 1031 Exchanges.

This is a must-watch for all real estate investors and agents. Let’s dive in.

Let's set the scene. A real estate agent, let's call her Cathy, reached out about her client, Mike.

Mike inherited an investment property five years ago and had been renting it out. He wanted to do a 1031 Exchange.

But here's where things took a turn.

I found out that Mike had already closed on selling his property that morning and received the proceeds.

Both Cathy and Mike wondered if they could still do a 1031 Exchange by wiring the funds back to the closing company.

Unfortunately, it was too late.

To qualify for a 1031 Exchange, you need to enter into an Exchange & Escrow agreement before closing.

Since Mike had already received the proceeds, a 1031 Exchange was off the table.

Mike was understandably upset.

He hadn't known about the 1031 Exchange option earlier, and now he was facing substantial capital gains taxes.

So, what’s the big lesson?

For investors: Engage with a Qualified Intermediary and set up your exchange agreement before closing.

You can’t have constructive receipt of the sale proceeds if you want to do a 1031 Exchange.

And for real estate agents, this story shows the value of being knowledgeable.

While it wasn’t directly Cathy’s fault, her awareness could have saved Mike a significant amount in capital gains taxes and enhanced her service to her client.

This story is a powerful reminder of the importance of timing and expertise in 1031 Exchanges.

That being said, reach out to me, Ryan Stulman, here at US 1031 Exchange Services ahead of time and we’ll get you set up for success.

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