--- title: Can a New Property Be Purchased Before the Old Property is Sold in a 1031 Exchange? description: If an investor identifies a potential replacement property before selling the asset that is to be relinquished in the 1031 exchange, the transaction can proceed as a reverse exchange. Read this article to learn more. image: https://www.realized1031.com/hubfs/Images/photo/abstract/stockkeysky-1076671622.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Can a New Property Be Purchased Before the Old Property Is Sold in a 1031 Exchange? Posted Sep 12, 2021 ![stockkeysky-1076671622](https://www.realized1031.com/hs-fs/hubfs/Images/photo/abstract/stockkeysky-1076671622.jpg?width=749&name=stockkeysky-1076671622.jpg) In a [1031 Exchange](https://www.realized1031.com/glossary/1031-exchange), a taxpayer defers capital gains taxes on the sale of real estate by exchanging the proceeds from the sale into a “like-kind” property of equal or greater value. The transaction derives its name from Section 1031 of the Internal Revenue Code. In addition to the tax on your capital gain, you may need to pay a state capital gains tax, depreciation recapture, and NIIT (Net Income Investment Tax) when you sell investment property for a price that is greater than your basis in the property. Instead of just selling, by completing a 1031 exchange, you can potentially defer each of these obligations. In a traditional 1031 exchange, the investor sells the identified property first but must ensure that they do not take possession of the proceeds from the sale. For that reason, engaging in a 1031 transaction requires using a [Qualified Intermediary](https://www.realized1031.com/videos/qualified-intermediary) throughout the process. The QI (sometimes called an exchange accommodator) is an essential participant in the exchange operation. This person (or company) maintains access to the proceeds from the sale of the relinquished property, completes the paperwork related to the formal identification of the replacement property or properties, and administers the purchase of the selected assets. ### What if I Find the Replacement Property First? Suppose the investor identifies the potential replacement property before selling the asset that is to be designated as the relinquished property in the 1031 exchange. In that case, the transaction can proceed as a reverse exchange. In some ways, it can ease the pressure associated with a 1031 transaction because you have the replacement property lined up in advance. But there are other potential complications. First, as the investor cannot be the buyer, you must have the QI facilitate the purchase and hold the property at arm's length (perhaps in a limited liability company) until you have sold the property you identify as the relinquished asset). If you don't sell that asset in the time allowed, the transaction won't qualify. The same limits still apply to the exchange as if you sold the property before buying the replacement, just in reverse. Second, within 45 days of the closing on the new property, you must identify the property (or properties) you plan to sell and then complete the transaction within 180 days, inclusive. In a fast-paced real estate market, that isn't as much of a concern, but it can be an issue if demand is down or the property that isn't attractive for some reason. ### What Else Can Complicate The Reverse 1031? If you buy the new (replacement) property with cash, the exchange will probably be straightforward. You loan the money to your QI to make the purchase and get paid back when you take control of the asset after the process is complete. However, a [reverse 1031](https://www.realized1031.com/blog/is-a-reverse-1031-exchange-right-for-you) can get sticky if you need to finance the acquisition. The lender needs to be willing to finance the property in a complicated structure and may require additional signers or guarantees.   This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. Costs associated with a 1031 transaction may impact investor’s returns and may outweigh the tax benefits. Download The Guide To 1031 Exchange [![The 1031 Investor's Guidebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/1031-Exchange-eBook-250.png?width=250&height=250&name=1031-Exchange-eBook-250.png "Tackle the art and science of ...") ](https://www.realized1031.com/blog/can-a-new-property-be-purchased-before-the-old-property-is-sold-in-a-1031-exchange#blogform) Download eBook ---   --- ### The 1031 Investor's Guidebook ![Download The Guide To 1031 Exchange](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/1031-Exchange-eBook-550.jpg?width=550&height=650&name=1031-Exchange-eBook-550.jpg) Tackle the art and science of completing your 1031 exchange. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "In a 1031 Exchange, a taxpayer defers capital gains taxes on the sale of real estate by exchanging the proceeds from the sale into a “like-kind” property of equal or greater value. The transaction derives its name from Section 1031 of the Internal Revenue Code. In addition to the tax on your capital gain, you may need to pay a state capital gains tax, depreciation recapture, and NIIT (Net Income Investment Tax) when you sell investment property for a price that is greater than your basis in the property. Instead of just selling, by completing a 1031 exchange, you can potentially defer each of these obligations. In a traditional 1031 exchange, the investor sells the identified property first but must ensure that they do not take possession of the proceeds from the sale. For that reason, engaging in a 1031 transaction requires using a Qualified Intermediary throughout the process. The QI (sometimes called an exchange accommodator) is an essential participant in the exchange operation. This person (or company) maintains access to the proceeds from the sale of the relinquished property, completes the paperwork related to the formal identification of the replacement property or properties, and administers the purchase of the selected assets. What if I Find the Replacement Property First? Suppose the investor identifies the potential replacement property before selling the asset that is to be designated as the relinquished property in the 1031 exchange. In that case, the transaction can proceed as a reverse exchange. In some ways, it can ease the pressure associated with a 1031 transaction because you have the replacement property lined up in advance. But there are other potential complications. First, as the investor cannot be the buyer, you must have the QI facilitate the purchase and hold the property at arm's length (perhaps in a limited liability company) until you have sold the property you identify as the relinquished asset). If you don't sell that asset in the time allowed, the transaction won't qualify. The same limits still apply to the exchange as if you sold the property before buying the replacement, just in reverse. Second, within 45 days of the closing on the new property, you must identify the property (or properties) you plan to sell and then complete the transaction within 180 days, inclusive. In a fast-paced real estate market, that isn't as much of a concern, but it can be an issue if demand is down or the property that isn't attractive for some reason. What Else Can Complicate The Reverse 1031? If you buy the new (replacement) property with cash, the exchange will probably be straightforward. You loan the money to your QI to make the purchase and get paid back when you take control of the asset after the process is complete. However, a reverse 1031 can get sticky if you need to finance the acquisition. The lender needs to be willing to finance the property in a complicated structure and may require additional signers or guarantees. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. Costs associated with a 1031 transaction may impact investor’s returns and may outweigh the tax benefits.", "articleSection" : [ "1031 Exchange" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2021-09-12T16:00:01+0000", "datePublished" : "2021-09-12T16:00:00+0000", "description" : "If an investor identifies a potential replacement property before selling the asset that is to be relinquished in the 1031 exchange, the transaction can proceed as a reverse exchange. Read this article to learn more.", "headline" : "Can a New Property Be Purchased Before the Old Property Is Sold in a 1031 Exchange?", "image" : { "@type" : "ImageObject", "height" : 500, "url" : "https://f.hubspotusercontent10.net/hubfs/733513/Images/photo/abstract/stockkeysky-1076671622.jpg", "width" : 749 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/can-a-new-property-be-purchased-before-the-old-property-is-sold-in-a-1031-exchange", "name" : "Can a New Property Be Purchased Before the Old Property Is Sold in a 1031 Exchange?", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://f.hubspotusercontent10.net/hubfs/733513/Images/photo/abstract/stockkeysky-1076671622.jpg" } ```