If you’re in the middle of an investment property search and you’ve found the one—but haven’t sold your current property yet—don’t worry. A Reverse 1031 Exchange might be the solution you need.

While most investors are familiar with the traditional 1031 exchange (sell first, buy later), the reverse version flips the process around—you buy first, then sell. It still lets you defer capital gains taxes, just with a different timeline and a bit more complexity.

What Is a Reverse 1031 Exchange?

In a Reverse 1031 Exchange, you acquire your replacement property first and sell your relinquished property later. It’s a useful strategy if:

• You find the ideal property before your current one sells
  
• The market is moving fast and you can’t risk missing out
  
• You want to secure a deal now but still plan to defer taxes
  

There’s one catch: the IRS doesn’t allow you to hold both properties in your name during the exchange. That’s where an Exchange Accommodation Titleholder (EAT) comes in—a third-party entity temporarily holds one of the properties until the process is complete.

How Is It Different from a Traditional 1031 Exchange?

Here’s a simple breakdown of the key differences:

Feature	Traditional 1031 Exchange	Reverse 1031 Exchange
Order of Transactions	Sell first, then buy	Buy first, then sell
Property Holding	You own the old property	EAT holds the new or old property
ID Deadline	45 days to identify new property	45 days after buying to ID sale
Completion Timeline	180 days to complete   exchange	Same: 180 days total
Complexity	Relatively simple	More paperwork + coordination
Costs	Lower	Higher, due to EAT and legal   structure

What About the Fees?

Yes—reverse exchanges are more expensive. Most of the added cost comes from setting up the EAT and legal arrangements. While a standard 1031 exchange might cost between $750 and $1,500, a reverse exchange typically runs $3,000 to $7,000+ depending on the provider.

Still, for the right property and situation, the benefits can far outweigh the cost.

Final Thoughts

A reverse 1031 exchange isn’t for everyone—it’s more complex, and it comes with additional costs. But for savvy investors who find the perfect deal before selling their current property, it’s a powerful tool to stay tax-efficient and competitive in a fast-moving market.

Want to learn more or see if this strategy is right for you? I’d be happy to connect you with a 1031 exchange specialist.

Want Expert Help?

Whether you’re buying, selling, or planning a 1031 exchange, I’m here to guide you.
Contact April Jeong-Callies for personalized support with investment properties across the Puget Sound region.

Helpful Resources

• IPX 1031: Reverse Exchange Basics
  
• IRS Like-Kind Exchange Guide
  

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Disclaimer

This information is provided for general educational purposes only and should not be considered legal, tax, or financial advice. Please consult with a qualified tax advisor, attorney, or 1031 exchange accommodator to determine how a 1031 exchange may apply to your specific situation. As a licensed real estate broker, I am happy to refer you to trusted professionals to support your investment goals.