8. Reverse 1031 Exchanges — How to Buy First and Sell Later

Welcome to Part 8 of our 1031 Exchange Blog Series.
So far, we’ve talked about how to sell your investment property first and buy your replacement within the IRS deadlines.

But what if the perfect property hits the market before you're ready to sell?

That’s where a Reverse 1031 Exchange comes in.

 What Is a Reverse 1031 Exchange?In a standard 1031 Exchange, you sell your property first and reinvest the proceeds.
In a Reverse Exchange, you do the opposite:

✅ You buy the replacement property first
✅ Then you sell your original investment property
✅ All within the same 180-day IRS window

This strategy is ideal when:

• You find the ideal property before your current one is listed

• You're in a competitive market like Brooklyn and need to move fast

• You want to lock in favorable pricing or financing before selling

The Wall Street Journal notes that reverse exchanges have surged post-pandemic, especially in hot metro markets with limited inventory.

 How Does It Work?

Because the IRS won’t let you hold both properties at the same time in a 1031 Exchange, your Qualified Intermediary will:

1. Create an Exchange Accommodation Titleholder (EAT)

2. Take temporary title of either the property you’re selling or buying

3. Coordinate the transaction with your broker, attorney, and lender

You still have:

• 45 days to identify the property being sold

• 180 days total to complete both legs of the exchange

 Pros & Cons

✅ Pros:

• Lock in the perfect replacement property

• Move quickly in competitive markets

• Protect against interest rate or price fluctuations

❌ Cons:

• Higher upfront capital or bridge financing may be needed

• More complex documentation and structure

• Requires careful coordination with experienced professionals

 How Brooklyn Investors Use It

The Real Deal has featured NYC investors who’ve used reverse exchanges to:

• Secure off-market buildings before public listings

• Exchange into new developments not yet released to MLS

• Trade out of aging properties without missing acquisition windows

And The New York Times highlights how this strategy can be useful for estate planning and long-term investment repositioning—especially for high-value assets.

Is It Right for You?

A reverse 1031 is a more advanced tax strategy—but it can be incredibly powerful when timing and opportunity align.

If you’ve found a dream property but haven’t sold your current one, a reverse exchange may be the right move.

Let’s Make It Work

At Pen Realty, I’ve helped clients navigate complex 1031 structures—reverse, improvement, and traditional.
If you're eyeing a deal and want to move fast while staying compliant, let’s talk.

📧 Email: [email protected]
📞 Call/Text: 917.916.5126
▶️ Watch the vlog series: @pmpenrealty

👉 Next up: The Top 1031 Exchange Mistakes—And How to Avoid Them