Finding the Best 1031 Exchange Company in Hawaii: A Guide for Investors

Hawaii 1031 Exchange Company: How to Choose the Best QI

Planning a 1031 exchange in Hawaii? Learn how to choose the right 1031 exchange company (Qualified Intermediary) for a smooth, compliant transaction. Professional tips & key considerations.

Overview

Choosing a 1031 exchange company is a critical step in the overall 1031 exchange process. As we discussed in our main article on Hawaii 1031 Exchanges, there are three key requirements to defer capital gains taxes: 1) The property must be held for qualifying purposes, 2) The property must be like-kind, and 3) There must be an exchange.

The 1031 exchange company facilitates that “exchange” for you. They will not only hold your money, they will create a safe transfer of property between the owners. To ensure that the exchange is valid and free from mistakes that may cause tax concerns, choose a qualified and reputable company, like the ones I mention below.

Finding the Best 1031 Exchange Company in Hawaii: A Guide for Investors

Are you planning a 1031 exchange in Hawaii? Choosing the right 1031 exchange company (also known as a qualified intermediary or facilitator) is crucial for a smooth and successful transaction. This guide will help you understand the role of a 1031 exchange company and provide tips for selecting the best one for your needs.

What is a 1031 Exchange Company (Qualified Intermediary)?

• A Qualified Intermediary (QI) acts as the facilitator or middleman in a 1031 exchange. The QI's role is to provide input, helping the taxpayer understand how a 1031 exchange works and interfaces with the title company or closing attorney.

• The QI is a neutral third party that facilitates the sale of the relinquished property and the purchase of the replacement property.

• The QI's main responsibility is to limit the taxpayer's rights to receive or obtain benefits from the proceeds from the sale of their 1031 property.

• They ensure compliance with IRS regulations and hold the exchange proceeds in a secure escrow account.

Why is Choosing the Right 1031 Exchange Company Important in Hawaii?

• Hawaii-Specific Regulations: Hawaii has unique real estate laws (HARPTA/FIRPTA, leasehold, vacation rentals). A QI familiar with these can prevent costly mistakes.

• Avoiding Disqualification: A knowledgeable QI helps ensure you adhere to strict timelines, property requirements, and other rules that could jeopardize your exchange.

• Understanding Disqualifications: The IRS has specific rules about who cannot act as your Qualified Intermediary. A QI helps you avoid these disqualifications, which include:

  • Having a close relationship with you: The QI cannot be your employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the two-year period ending on the date of transfer of the first of the relinquished properties.

  • Being a “disqualified person” under IRS rules. This includes certain family members and related entities.

• Local Expertise: A local QI network will know who to call, where to go, how things work and how to get problems addressed. They will have your back to ensure your money isn’t sitting around making you sweat while you wait.

What to Look For in a 1031 Exchange Company:

• Experience and Expertise: Look for a company with a proven track record in 1031 exchanges for Hawaii.

• Financial Security: Ensure the company has adequate insurance and bonding to protect your funds.

• Reputation and References: Check online reviews and ask for references from past clients.

• Customer Service: Choose a company that is responsive, communicative, and provides personalized support.

• Fees and Costs: Understand the fee structure and any potential hidden costs.

• Qualifications: Ensure the person or entity is actually a QI and that the QI and you are not related parties, or other types of disqualifications.

Top 1031 Exchange Companies Serving Hawaii:

• Old Republic Exchange Company: Old Republic Exchange Company provides professional qualified intermediary services throughout the Hawaiian Islands. They offer expertise in navigating complex 1031 exchange transactions and are known for their commitment to customer service and security. Reach out to them to learn how they can help you succeed with your next exchange.

• IPX1031: IPX1031 is your professional state of Hawaii resource on 1031 Exchange rules, 1031 regulations and 1031 strategy. With a nationwide team of savvy attorneys, CPAs and Certified Exchange Specialists, IPX1031 services all of the Hawaiian Islands by phone, video calls, email and in person.

• Exeter 1031 Exchange Services, LLC

Tips for Working with a 1031 Exchange Company:

• Engage the QI before selling your relinquished property. Ideally, you will notify a QI one to two weeks prior to the scheduled closing of the relinquished property. Your real estate agent should advise you on this from the start!

• Communicate your investment goals and preferences clearly. Details are key for a 1031 to be successful.

• Provide all necessary documentation promptly.

• Stay informed throughout the exchange process. If you feel communication is lacking, make sure you get your questions answered, this is too important of a process to leave any uncertainty.

• Consult with your tax advisor and attorney to make sure your Hawaii 1031 is being properly set up - they may also have referrals for an Hawaii 1031 Exchange Company.

• Make sure the funds go to the QI. A QI creates an escrow account with a bank or financial institution to hold the funds.

• Check online reviews. This is important so you can see what others doing Hawaii 1031 exchanges have had with the company you are looking at.

Disclaimer: This information is general and educational. Always consult your tax advisor, CPA, or a Hawai’i-licensed attorney before making decisions related to a Hawai’i 1031 exchange.