How Much Does a 1031 Exchange Cost? Estimate the Fees

how much does 1031 exchange cost

Did you know appraisal fees in real estate can reach up to $5,000? This is common in large commercial deals. Such fees are part of a 1031 exchange’s costs. A 1031 exchange lets investors defer taxes on capital gains by investing in another property.

Knowing the cost of a 1031 exchange helps investors make smart decisions. Qualified Intermediary (QI) fees range from $600 to $1,200 for standard services. Institutional QIs may charge $800 to $1,200. These fees cover setup and administrative tasks.

Additional charges apply for each property, between $300 to $500. Also, QIs keeping interest income adds to the total cost. It’s key to examine all expenses and compare services. Bigger firms like Exeter 1031 Exchange Services, LLC sometimes have higher fees. They often cover a sale and a purchase within their base fee, but charge more for extra properties.

Looking at 1031 exchange costs means more than just the initial price. Consider risk reduction and different types of exchanges, such as Forward, Reverse, and Build-To-Suit. A thorough cost analysis helps investors tackle complexities and make wise choices.

Introduction to 1031 Exchange Costs

A 1031 exchange lets you defer taxes on gains from investment property. It includes costs like set-up fees, property administration fees, and interest income kept by the Qualified Intermediary (QI). Knowing these fees is key to keeping the tax-deferred status and avoiding taxes.

QIs charge different fees. Institutional QIs usually ask for $850 to $1,200 per deal. Non-institutional ones may charge less, between $600 and $800. Every extra property may cost about $300 to $400 more. Below is a table showing some typical 1031 exchange fees:

Type of Fee Typical Cost
Institutional QI Admin Fee $850 – $1,200
Non-Institutional QI Admin Fee $600 – $800
Additional Property Fee $300 – $400 per property
Recording Fee $200 to thousands
Title Insurance Starts at 1% of the property value
Escrow Fee 1-2% of the total property value
Transfer Taxes 1-3% of the total property value

Interest income on 1031 exchange funds is vital to note. It makes up two-thirds of a QI’s earnings. For example, if a QI’s bank has a 1.35% interest rate for escrowed funds, it means about $3.75 daily per $100,000. This interest goes to the QIs, showing why every detail matters.

QIs might also add fees for special services. These can include costs for wire transfers, overnight mail, and faxing. Smaller QIs may have extra fees for things like seller carry-back financing. It’s important to watch out for these to avoid surprises.

To conclude, understanding every fee in a 1031 exchange helps investors use this tax-deferral option wisely. It’s about knowing the noticeable and the hidden costs.

Breakdown of 1031 Exchange Fees

The cost of a 1031 exchange includes several parts that affect the total expense. Much of this cost goes to the Qualified Intermediary (QI) fees. For a delayed exchange, QI fees usually are between $750 and $1,250. Setting up fees for classic exchanges range from $850 to $1,200 each. Non-institutional intermediaries may charge between $600 and $800.

Reverse exchanges are more complex and costlier, with fees from $3,000 to $8,000. Additionally, managing each property in the exchange adds fees of $300 to $400.

The total cost also depends on how many properties are involved, their location, and the chosen exchange provider. Here are the main fees for a 1031 exchange:

Type of Fee Cost Range
Average 1031 Exchange Cost $600 – $1,200
Qualified Intermediary (Delayed Exchange) $750 – $1,250
Setup/Administrative Fees (Traditional 1031 Exchange) $850 – $1,200
Non-institutional Intermediaries $600 – $800
Reverse 1031 Exchanges $3,000 – $8,000
Additional Property Fees $300 – $400
Broker Commissions 4% – 8% of property value
Escrow Fees 1% – 2% of property value
Transfer Taxes 1% – 3% of property value
Inspection Fees Approximately $0.1 per sq. ft.
Recording Fees Average $200
Title Insurance Starting at 1% of property value
Loan Acquisition Fees Varies

Investors need to closely review these costs for 1031 like-kind exchanges. Understanding all the fees involved helps make better choices. It also protects their investment in the real estate world.

Special Considerations for Complex 1031 Exchanges

Getting to know the complex parts of 1031 Exchanges is key for investors. They aim to make the most out of their investments within certain rules. Reverse and construction 1031 Exchanges have higher costs. They also need a deeper understanding of the rules.

In reverse 1031 Exchanges, the costs go from $3,000 to $8,000. This shows the complex and risky nature of these transactions. The big challenge is buying a new property before selling the old one. Investors must manage big upfront costs and follow strict rules. Not earning interest makes these exchanges even more costly.

A regular 1031 Exchange gives investors 45 days to pick possible new properties after they sell their old one. They must decide by the end of the 45th day. They usually choose three properties. Then, they buy one or more of these within 180 days. Even though the fees are high, the rewards can be worth it in some markets.

The Tax Cuts and Jobs Act of 2017 changed the game. It stopped exchanges for personal property but kept them for real estate. These changes bring up discussions about the pros and cons of like-kind exchanges. The government’s need for funds for expenses and new projects makes these exchanges more appealing. This is despite the initial high investment.

Even with the higher costs of special 1031 exchanges, they offer important tax deferral benefits. They also encourage meeting important deadlines. These benefits are key for expert investors. Tax deferral advantages can range from 0.4% to 8.5% of the old property’s value. On average, the benefit is around 4.4%.

Type of Exchange Fees Range Primary Considerations
Reverse 1031 Exchange $3,000 – $8,000 High upfront costs, compliance with identification timelines
Construction 1031 Exchange Variable high fees Detailed construction blueprints, compliance complexities

In the end, the fees for complex 1031 exchanges might seem steep. However, the strategic benefits in the right market conditions are worth it. This is true when investors follow rules closely and understand the special considerations involved.

Additional Costs and Non-Qualified Fees

Knowing about extra expenses in 1031 exchanges is key to keeping your tax benefits. Some costs not allowed in 1031 exchanges can make you owe taxes if paid with exchange funds. You should pay for regular expenses, like maintenance and part of the rent, yourself.

Expense Type Cost Range
Qualified Intermediary Fees (non-institutional) $600 – $1,200
Qualified Intermediary Fees (institutional) $800 – $1,200
Setup and Administrative Fees $600 – $1,200
Per Property Fees $300 – $500
Appraisal Fees Up to $5,000+
Brokers’ Commissions 4% – 8%
Escrow Fees Up to 2%
Excise/Transfer Taxes 1% – 3%
Inspection Costs Varies
Prorated Taxes Varies
Recording Fees Varies
Title Insurance 1%
Loan Acquisition Fees 0.5% – 1%
Application Fees $100
Mortgage Lender Appraisals Up to $1,000
Debt Assumption Fees Up to 1%

Use your own money for costs not allowed in 1031 exchanges to keep your tax advantage. Clearly dividing your operational costs can prevent tax mistakes in 1031 exchanges. Always get advice from tax experts when dealing with these complex rules.


Understanding 1031 exchange costs is vital for saving on taxes and making money. Qualified Intermediary (QI) fees usually range from $600 to $1,200. But, the price can go higher depending on the property value and the exchange’s complexity. For higher setup fees, institutional QIs charge between $850 to $1,200. Also, specialized exchanges like Reverse 1031 Exchanges may cost from $3,000 to $8,000.

It’s crucial for investors to know the difference between qualified and non-qualified costs. Non-qualified expenses, like some closing costs, can risk the tax-deferred status if paid with exchange funds. To keep the benefits of a 1031 exchange, these should be paid out-of-pocket. This ensures investors follow IRS rules and keep the exchange valid.

Choosing a reliable QI and working with tax experts is key for a smart 1031 exchange. They offer advice based on your financial goals. By looking at all fees, from admin to property inspections, investors can make smart choices. These choices help maintain tax benefits and sensible investment practices.

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About the author

Nathan Tarrant

Nathan has worked in financial services, marketing, and strategic business growth for over 30 years. He was the founder and COO of a Queens award-winning financial services company based in the UK, and a capital investment company in Virginia USA..

He operated as a financial & alternative investment advisor to delegates of the UN, World Health Organization, and senior managers of Fortune 500 companies in Geneva, Switzerland, after the 2008 financial crash.

As an avid investor, especially in alternative investments, he runs this blog, sharing his growing experience and views on alternative investments. You can see Nathan's full profile at his personal website
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