1031 Exchange Financing: How to Line Up the Loan for Your Replacement Property

A 1031 exchange lets an investor defer capital gains tax by reinvesting sale proceeds into another qualifying investment property. The tax rules belong to your CPA and qualified intermediary. My job is the financing side: having the loan ready before the clock runs out.

How does the timeline work?

After you sell your property, you generally have 45 days to identify replacement properties and 180 days to close on one. The sale proceeds go to a qualified intermediary, not to you. If you touch the money, the exchange can fail. Those deadlines are why financing has to be organized early.

Why does financing matter so much?

Because the deadlines don’t move. If your loan isn’t ready when you find the property, you can lose the exchange or be forced into a rushed decision.

What loan types do investors use?

•             DSCR loans qualify the property’s rental income instead of your personal tax returns, which helps investors whose returns show heavy depreciation and write-offs. [LINK: your DSCR investment property loans page]

•             Conventional investment loans can work for borrowers with simpler income.

•             Bank statement and other alternative programs may help self-employed investors.

What should you plan for?

Replace value and debt. To defer the whole gain, you generally need to buy property of equal or greater value and reinvest all of the net proceeds. Taking cash out, or ending up with less debt without adding cash, can create taxable “boot.” Your CPA can explain how that applies to you.

Get pre-approved before you sell. We can review your income, credit and reserves and outline the loan on the replacement property before your 45-day window starts.

Make the closing timeline realistic. Appraisals, entity documents and property issues all take time.

What does this not cover?

I’m a mortgage lender, not a tax advisor. Whether a property qualifies for a 1031 exchange, how long you must have held it and how boot is taxed are questions for your CPA and qualified intermediary.

How do you start?

Bring your CPA and intermediary into the conversation early. Then talk to me about the loan options before you list the property you’re selling.

Selling an investment property? Let’s line up the financing first. Explore DSCR investment property loans

General information only. Not tax, legal or accounting advice. Consult your CPA and qualified intermediary.

Mike Belfor, Branch Manager and Mortgage Loan Originator, American Pacific Mortgage, NMLS 264700 (Company NMLS 1850). Equal Housing Opportunity. Updated September 18, 2026.