This article was posted on Wednesday, Jun 01, 2022
1031 Exchange

Successful real estate investors come from a wide variety of backgrounds and employ an assortment of investment techniques. All have their own unique approach to owning, managing, and selling assets. However, I believe successful investors have one common element: a team of trusted advisors to help navigate and execute their investment approach. The world of investment real estate is simply too complex to go alone.

Building a strong, effective team of preferred service providers is a critical component of successful real estate investing. Attorneys, CPAs, property management personnel, contractors, brokers, title and escrow professionals are just a sampling of the individuals who can be contributory or detrimental to an investment opportunity. Vetting service providers that will enhance, rather than detract from, your investment, can be difficult unless you have a framework for evaluation.

Qualified Intermediary 

Within the exchange world, the Qualified Intermediary (“QI”) is one of the key service providers that can facilitate a smooth and orderly exchange or quite the opposite. Since owners cannot take possession of the sales proceeds from their relinquished property, a Qualified Intermediary (QI) serves as “exchange escrow” and holds on to the exchange proceeds until the replacement properties have been identified and funds are released to purchase them. Here is how you evaluate them:

  • Insurance – What levels of insurance do they have, and what situations do their policies cover? Types of insurance relevant to Exchanges are fidelity bonds, errors and omissions insurance, and written performance guarantees. Are they willing to show you the policies they claim to have? Are the policies sufficient to cover the exchanges they have in process at any given point?
  • Fee Structure – Most exchanges are relatively straightforward and include one property exchanged for one or more properties. The costs associated with these exchanges should be low and defined. More complex exchanges such as Improvement Exchanges and Reverse Exchanges are more involved and often have variability in the fee structure – however, the fees should still be defined in advance of the Exchange.
  • Internal Security Controls – Exchanges involve moving large sums of money from one party to another. Surprisingly, the industry is not regulated at the federal level. However, the industry trade association for QIs, the Federation of Exchange Accommodators, has defined best practices for QIs to adhere to in order to protect a client’s funds. Understanding and gaining comfort with a potential QI’s policies regarding data security, cyber security, and identity verification are of the utmost importance.
  • Client Centric Counsel – Quality QIs provide value to their clients through quality counsel to the Exchanger regarding what is and is not legally permissible in an exchange. QIs often disclaim any counsel provided by saying that the client should consult their own attorney for liability purposes. However, a good QI will not hesitate to put one of their seasoned attorneys on the phone with an Exchanger if they have questions regarding the exchange.

Bottom Line

Tax-deferred 1031 exchanges may present a tremendous opportunity for wealth preservation and asset repositioning, provided an investor has the right team in place. 

If you are interested in learning more about the opportunities available through tax-deferred exchanges or would like to discuss our firm’s preferred qualified intermediaries, please do not hesitate to contact us at 888-286-5395 or email [email protected], or visit

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Real Estate Transition Solutions is a consulting firm specializing in tax-deferred 1031 Exchange strategies and Delaware Statutory Trust investments. For over 26 years, they have helped investment property owners perform strategic 1031 exchanges by developing and implementing well-planned, tax-efficient transition plans carefully designed to meet their objectives. Their team of licensed 1031 Exchange Advisors will guide you through the entire exchange process and help you select 1031 replacement properties best suited to meet your goals.

IMPORTANT INFORMATION – The information herein has been prepared for educational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. Such offers are only made through the sponsor’s Private Placement Memorandum (PPM), which is solely available to accredited investors and accredited entities. There are risks associated with investing in real estate properties, including, but not limited to, loss of entire investment principal, declining market values, tenant vacancies, and illiquidity. Because investor situations and objectives vary, this information is not intended to indicate suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your situation. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney. Securities offered through Aurora Securities, Inc. (ASI), member FINRA/SIPC. Advisory services offered through Secure Asset Management, LLC (SAM), a registered investment advisor. ASI and SAM are affiliated companies. Real Estate Transition Solutions (RETS) is independent of ASI and SAM.