--- title: Can You Do A 1031 Exchange With A Loan? description: There could be situations in which proceeds from a relinquished property might either not be sufficient or immediately available to fund the replacement property’s acquisition. In these circumstances, obtaining a loan to help complete the process might be a solution. Learn more. image: https://www.realized1031.com/hubfs/propertytaxes-1295797018.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 You Do A 1031 Exchange With A Loan? Posted Nov 13, 2022 ![propertytaxes-1295797018](https://www.realized1031.com/hs-fs/hubfs/propertytaxes-1295797018.jpg?width=750&height=500&name=propertytaxes-1295797018.jpg) The [26 U.S. Code § 1031](https://www.law.cornell.edu/uscode/text/26/1031)—“Exchange of real Property Held for Productive Use or Investment”—can be useful if you’re interested in potential capital gains tax deferrals on the sale of certain types of real estate. Part of the process involves exchanging into a property of equal or greater value than the one you’re relinquishing.  But there could be situations in which proceeds from the relinquished property might either not be sufficient or immediately available to fund the replacement property’s acquisition. In these circumstances, obtaining a loan to help complete the process might be a solution.  ### “Of Greater Value”  Remember that one main guideline of the like-kind exchange is that your targeted replacement property or properties are of equal or greater value to your relinquished asset. But that property of greater value might lead to a capital gap between your relinquished property sales proceeds and what’s needed to fully fund the replacement property’s acquisition.  This is where a [bridge loan](https://www.realized1031.com/glossary/bridge-loan) might be helpful. Bridge loans are a method of short-term financing and quick financing. A bridge loan stays in place until you can refinance into a permanent, longer-term loan or you pay it off.  ### The Reverse Exchange  The most common like-kind exchange is the [delayed exchange](https://www.realized1031.com/glossary/delayed-exchange). Through this, you sell your relinquished property and target (then acquire) the replacement property. All of this takes place within the IRS’s specific deadlines.   Then there is the [reverse exchange](https://www.investopedia.com/terms/r/reverse-exchange.asp). This can occur if you find a replacement property you really like and wish to acquire before actually selling the relinquished property. In this position, you’ll need an [Exchange Accommodation Titleholder](https://www.realized1031.com/glossary/exchange-accommodator-titleholder-eat) to take possession of either the replacement or relinquished property (as you can’t hold both at the same time).  You might also need a loan to acquire the replacement property, as you’ve yet to receive proceeds from your relinquished one. Once you’ve sold your relinquished property, you would then immediately pay off the loan. However, this is a highly specialized and short-term finance option which is offered only by certain lenders or financial institutions.  ### Borrower Beware  If you decide to use a loan in the above situations, be sure to find a lender with like-kind exchange experience. Any misstep or confusion during the process could raise a red flag and saddle you with an unexpected tax bill. By the same token paying off debt on the relinquished property could also trigger a tax. So be cautious, and work with your tax professional or financial advisor before adding debt into your 1031 exchange process.    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. It should also not be construed as advice meeting the particular investment needs of any investor.  Costs associated with a 1031 transaction may impact investor’s returns and may outweigh the tax benefits. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities.  There is no guarantee that the investment objectives of any program will be achieved.  Hypothetical examples shown are for illustrative purposes only.  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.   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-you-do-a-1031-exchange-with-a-loan#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. 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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" : "The 26 U.S. Code § 1031—“Exchange of real Property Held for Productive Use or Investment”—can be useful if you’re interested in potential capital gains tax deferrals on the sale of certain types of real estate. Part of the process involves exchanging into a property of equal or greater value than the one you’re relinquishing. But there could be situations in which proceeds from the relinquished property might either not be sufficient or immediately available to fund the replacement property’s acquisition. In these circumstances, obtaining a loan to help complete the process might be a solution. “Of Greater Value” Remember that one main guideline of the like-kind exchange is that your targeted replacement property or properties are of equal or greater value to your relinquished asset. But that property of greater value might lead to a capital gap between your relinquished property sales proceeds and what’s needed to fully fund the replacement property’s acquisition. This is where a bridge loan might be helpful. Bridge loans are a method of short-term financing and quick financing. A bridge loan stays in place until you can refinance into a permanent, longer-term loan or you pay it off. The Reverse Exchange The most common like-kind exchange is the delayed exchange. Through this, you sell your relinquished property and target (then acquire) the replacement property. All of this takes place within the IRS’s specific deadlines. Then there is the reverse exchange. This can occur if you find a replacement property you really like and wish to acquire before actually selling the relinquished property. In this position, you’ll need an Exchange Accommodation Titleholder to take possession of either the replacement or relinquished property (as you can’t hold both at the same time). You might also need a loan to acquire the replacement property, as you’ve yet to receive proceeds from your relinquished one. Once you’ve sold your relinquished property, you would then immediately pay off the loan. However, this is a highly specialized and short-term finance option which is offered only by certain lenders or financial institutions. Borrower Beware If you decide to use a loan in the above situations, be sure to find a lender with like-kind exchange experience. Any misstep or confusion during the process could raise a red flag and saddle you with an unexpected tax bill. By the same token paying off debt on the relinquished property could also trigger a tax. So be cautious, and work with your tax professional or financial advisor before adding debt into your 1031 exchange process. 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. It should also not be construed as advice meeting the particular investment needs of any investor. Costs associated with a 1031 transaction may impact investor’s returns and may outweigh the tax benefits. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. There is no guarantee that the investment objectives of any program will be achieved. Hypothetical examples shown are for illustrative purposes only. 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.", "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" : "2022-11-13T13:00:00+0000", "datePublished" : "2022-11-13T13:00:00+0000", "description" : "There could be situations in which proceeds from a relinquished property might either not be sufficient or immediately available to fund the replacement property’s acquisition. In these circumstances, obtaining a loan to help complete the process might be a solution. 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