1031 Exchange in Texas – Your Guide to Rules, Exchange Companies, Requirements and More

Last updated on January 22nd, 2021 at 02:56 pm

If you’re a Texas real estate investor, you’ve likely been very happy with the result over the past few years. Texas is on fire – the economy is doing well, unemployment is low, and property appreciation is through the roof. All reasons that point to the 1031 exchange in Texas being a great idea.

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Areas such as Austin, Dallas, Houston, San Antonio, and others have seen property prices explode over the past few years. Add to that a high property tax rate, and some real estate investors are looking to take some chips off the table. By selling, investors are accomplishing various goals such as increased cash-flow, lower geographic concentration risk, and fewer property management headaches.

So when you go to sell, why would you give the federal government 40% of your gains? After paying enormous sums in property tax, you still get the short end of the stick when selling, and it makes it hard to reinvest in something new! That’s where the 1031 exchange in Texas comes in. By using the 1031 exchange in Texas, investors can defer taxes on a real estate sale into their next property. There are tons of great reasons to use the 1031 exchange in Texas. We’ll explain all of those, and more.

In this article, we’ll start with a quick overview and refresher about 1031 exchange basics. Then, we’ll discuss the rules and definitions of the 1031 exchange that are specific to the state of Texas. After, we’ll discuss the advantages Texas real estate investors have in doing a 1031 exchange over not doing one. Last, we’ve vetted some of the top 1031 exchange companies and their qualified intermediaries. The state of Texas is one of the best states to do a 1031 exchange, and an abundance of great qualified intermediaries is part of that. Let’s get started!

1031 Exchange in Texas Rules Basics

Before we talk about how the 1031 exchange in Texas is different than other states, below is a quick refresher about the basics of the 1031 exchange.

The 1031 Exchange, also called a Starker Exchange or Like-Kind Exchange, is one of the most powerful tax-deferral strategies in real estate. Simply put, it allows you to defer paying capital gains and depreciation recapture taxes by “exchanging” your existing property for a new, replacement property.

a texas 1031 exchange can save you thousands of dollars in taxes

Instead of literally “swapping” properties with another person (called the simultaneous exchange), most investors opt for the delayed exchange. In this exchange, you sell your existing property, and purchase a new, replacement property of equal or greater value within a specific timeline.

These timelines mandate that you identify three potential replacement properties within 45 days of your old property being sold, and that you close on one of them within 180 days. As long as this new, replacement property is “like-kind” to the original property, is equal or greater value, and you had help from a qualified intermediary, your exchange will be successful. We are trying to simplify the 1031 exchange concept as much as possible, when there’s a ton of other subjects to cover to ensure your 1031 exchange in Texas is successful.

1031 Exchange Rules Specific to Texas

Unlike some states such as Washington, California, Colorado, and others, Texas does not have any state-level rules to consider for the 1031 exchange. Owing to Texas’ business-friendly climate, growing economy, and low overall taxes, this is not surprising! Texas has no state income or capital gains taxes. This makes it all the more critical to ensure that your 1031 exchange company and qualified intermediary are experienced and reputable.

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Other states like Washington have put into place guidelines and rules that the 1031 exchange companies must follow. In Texas, anyone can become a qualified intermediary. This means no special schooling, certifications, or licenses are required! There have been instances of qualified intermediaries getting their clients into issues, or even declaring bankruptcy and using client funds to pay creditors. If you are looking for a reputable 1031 exchange company in Texas, the bottom of this article has our recommendations.

Why Do a 1031 Exchange in Texas

Aside from saving on taxes (both capital gains AND depreciation recapture), there are numerous other advantages to doing a 1031 exchange in Texas. Since most metro areas in Texas have seen tremendous appreciation over the past few years (especially Austin, Dallas, and San Antonio), many investors want to take chips off the table while deferring taxes. Below are some of the best reasons Texas real estate investors should consider the 1031 exchange for their investment property.

Save on Texas Property Taxes With 1031 Exchange

Anyone who owns property in Texas, for investment purposes or otherwise, will tell you how high the property taxes are in the state. Since Texas doesn’t have state income tax, this is how local schools, roads, and other services are funded.

texas public schools are funded with property taxes rather than income taxes

If you’re tired of shelling out massive sums on property taxes, a 1031 exchange may be a great option. With a 1031, you can exchange your Texas investment property for property in another state. Especially popular are crowdfunded, passive investments such as Delaware Statutory Trusts. This way, you can benefit from Texas’ zero income tax policy while avoiding as high of property taxes on your new property.

Greater Flexibility on Property Types with 1031 Exchange

Nearly everyone knows that the primary goal of most 1031 exchanges is to save on taxes. What investors may not know, however, is that it’s also a great tool to provide flexibility on the property type you own. Many assume that the “like-kind” requirement means that if you sell a single family home, you must replace it with another single family home. This is not the case!

In many instances, investors are using the 1031 exchange in Texas to move to an entirely different type of property, tax-deferred. For example, some investors are diversifying out of multi-family or self-storage real estate and into industrial properties or even vacant land. Surprisingly, even mineral right ownership is considered like-kind.

This is great for investors who have built up a portfolio of residential properties and are looking to take a step back in terms of management and headaches. Especially if you’re looking into estate planning options and don’t want to pass a portfolio real estate properties to various heirs, a 1031 exchange in Texas can help. By diversifying a portfolio of single family homes into a DST or oil & gas interest, you can increase cash-flow while working fewer hours. All while paying zero taxes!

Best 1031 Exchange Companies in Texas

If you’ve decided that a 1031 exchange in Texas is right for your situation, that presents the next question. “How do I do a 1031 exchange in Texas?” The first step is always consulting with a 1031 exchange company in Texas, and finding the best qualified intermediary for the job. We’ve vetted the experts, spoke with customers like yourself, and reached out to each of these exchange companies. Below are our top picks for your 1031 exchange in Texas.

Texas 1031 Exchange

Image result for texas 1031 exchange

Our first pick for the best 1031 exchange companies in Texas is aptly named….Texas 1031 Exchange! Texas 1031 is run by two partners and the team has been conducting 1031 exchanges for nearly 20 years. Wayne H. Roitsch and Sydney A. Miller are both Certified Exchange Specialists, and conduct 1031 exchanges both in Texas and around the United States.

Founded in the early 2000’s, Texas 1031 Exchange differentiates themselves by having the most in-depth knowledge of Texas-specific rules and and regulations. Since many Texas investors are involved or want to get involved in the oil & gas industry, Texas 1031 is a great resource for exchanges involving mineral rights royalties. Believe it or not, you can exchange a condo or duplex (or any other kind of investment property) for oil and gas royalties. These usually require zero management, and are the most “passive” income sources around!

Further, Texas 1031 Exchange is an independent voice on the 1031 exchange industry and in the way it serves its customers. Other 1031 exchange companies are owned by large title companies, many of which are publicly traded and must report their results to Wall Street. Since Texas 1031 Exchange is privately owned, they are better able to focus on what’s best for their clients, not its shareholders.

Services Texas 1031 Exchange Offers

Where Texas 1031 Exchange sets itself apart from other qualified intermediaries is in the breadth and depth of services they offer. Not only do they offer the four standard types of 1031 exchanges (which we list below), they also have expertise in areas that are specific to Texas real estate.

Texas 1031 Exchange has made it their specialty to work on exchanges involving farms or ranches throughout Texas, Oklahoma, and other regions. Since these exchanges often are a combination of a personal residence, livestock, business property, personal property, and other wildlife they can be EXTREMELY complex. Just from Texas 1031’s website, they talk about a male cow only being like-kind to another male cow, and other complex scenarios. If you’re looking to do a 1031 exchange on a farm or ranch, we recommend giving Texas 1031 Exchange a call immediately for assistance.

Here’s the full list of services Texas 1031 Exchange offers:

  • Delayed 1031 Exchange
  • Reverse 1031 Exchange
  • Improvement 1031 Exchange (Also called construction or build-to-suit exchange)
  • Simultaneous 1031 Exchange
  • Farm and Ranch Exchanges
  • Real Property as part of an investment property
  • Livestock held with intent for breeding
  • Combined Section 1031 and Section 1033 Exchanges

Texas 1031 Exchange Experience and Financial Stability

Since both Wayne and Sydney have been helping investors with their exchanges for nearly twenty years, they have seen most every type of exchange out there. They have conducted thousands of exchanges over the years, and investors can trust that they can help in your situation as well.

Additionally, most of their customer base comes in through referrals. This is both from previous customers of Texas 1031’s, as well as their network of CPA’s, attorneys, and other real estate professionals.

Both Sydney and Wayne are members of the Federation of Exchange Accommodators (FEA) which is the largest professional organization for qualified intermediaries. They have annual meetings, and have done more to advance the professionalism of the 1031 exchange industry than any other group. Even more impressive, Sydney and Wayne are both Certified Exchange Specialists. This means they’ve passed a series of exams testing their proficiency and knowledge of the IRC 1031 code.

Last, Texas 1031 not only holds satisfactory levels of fidelity bonding and errors and omissions coverage, but also publishes the policies on their website. They hold a fidelity bond through Lockton Insurance in the amount of $1M per occurrence, leading in the industry for independent exchange companies. They also hold $500,000 in errors and omissions coverage through specialty carrier Scottsdale Indemnity. This helps you know your funds are secure, and if anything happens you are covered thoroughly.

Texas 1031 Exchange Locations and Customer Service

After reaching out to Texas 1031, we have found both Wayne and Sydney to be responsive, prompt, and accurate in their dealings with clients. We highly recommend you give their office a call, or if you are in the area, stopping by to visit. It is a big advantage for investors in the state of Texas to be able to visit their qualified intermediary in person. Many of the 1031 exchange concepts are relatively complex, and need a whiteboard session to explain fully! This is a great reason to choose Texas 1031 Exchange if you’re in the area.

If you’re in the greater Austin area and looking to do a 1031 exchange, they keep their office in the small city of Seguin, TX.

Seguin – 516 N. Austin St. Seguin, TX 78155

Investment Property Exchange Services – IPX 1031

ipx one of the best 1031 exchange in texas companies

Next on our list is one of the largest 1031 exchange companies in the United States – IPX 1031. Headquartered in Jacksonville, FL and a subsidiary of Fidelity National Financial, IPX 1031 also has an extremely strong presence in the state of Texas. They have five experienced qualified intermediaries across four separate offices across the state. Whether you’re in Dallas-Fort Worth, Austin, or Houston, there is always an IPX facilitator nearby.

Founded in the 1980s originally, IPX has been on the forefront of the 1031 exchange industry from the beginning. Their Texas team, which includes Rae Anne Carlisle, Carl Pikus, Theresa Quartaro, Craig Brown, and Patrick Noonan are all experienced 1031 exchange facilitators. Not only are they experienced, they also have the backing of a Fortune 500 company in Fidelity National. If you are worried about a “fly by night” operation – IPX 1031 is not it. If you are in the state of Texas (or elsewhere) we highly recommend the Texas IPX 1031 group.

1031 Exchange in Texas Services IPX Offers

The Texas IPX 1031 team has a ton of experience conducting 1031 exchanges in Texas. Owing to this experience, they offer the full slate of 1031 services that you will need. Although they don’t advertise farm and ranch specific services like Texas 1031 does, there are many members of the team who are experienced in extremely complex exchanges. They advertise the following exchanges on the IPX 1031 website:

  • Delayed 1031 Exchange
  • Reverse 1031 Exchange
  • Improvement 1031 Exchange (Also called construction or build-to-suit exchange)
  • Simultaneous 1031 Exchange

IPX Experience and Financial Stability

Most of the Texas IPX team has been in the 1031 exchange industry since it began, and are some of the most experienced qualified intermediaries out there. IPX pulls off thousands of Texas 1031 exchanges each year locally and across the country. Knowing this, their team has likely seen nearly every situation or scenario out there.

Additionally, many of IPX’s qualified intermediaries are also lawyers or attorneys. Even though QI’s are not allowed to give legal advice on your 1031 exchange, it is useful in order to have as a backup resource. You CAN have a scenario where one qualified intermediary at the exchange company is your dedicated QI, and another acts as an attorney in order to provide you legal advice. Also, most of IPX’s staff are members of the Federation of Exchange Accommodators, and many hold the Certified Exchange Specialist designation.

IPX takes client safety and security extremely seriously. Owing to this, they hold one of the top fidelity bonds and top errors and omissions coverages in the entire industry. IPX is protected with a $100M fidelity bond, and $30M E&O policy. Last, IPX also offers a unique perk that most 1031 exchange companies do not do. They have a $50M performance guaranty, which protects you in case of any kind of emergency or inaccuracy during the exchange.

IPX 1031 Locations and Customer Service

One of the best aspects of IPX 1031 in Texas is that they have very broad coverage throughout the state. They have the most qualified intermediaries of any 1031 company, with five, and by far the most offices, with four. We have found the IPX team to be extremely responsive to inbound requests. Since many of their qualified intermediaries are paid on commission, they are incentivized to close new customers quickly and accurately.

If you need a 1031 exchange in Texas ASAP, we highly recommend the services of IPX 1031. Below is a list of their offices throughout the state of Texas.

San Antonio – 950 East Basse Road San Antonio, TX 78209

Austin – 3520 Bee Caves Rd.,Suite 250 Austin, TX 78746

Houston – 1900 West Loop South,Suite 100 Houston, TX 77027

Dallas – 5430 LBJ Freeway, Suite 261 Dallas, TX 75240

Texas Escrow Company – Part of Republic Title of Texas

Image result for texas escrow company

Our next 1031 exchange company in Texas to highlight is the work that Carla Janousek does as part of the Texas Escrow Company. She is in Dallas, and Texas Escrow Company is majority owned by Republic Title, one of the largest title companies in the state of Texas. Funny enough, Republic Title is also a subsidiary of First American Title Company. First Am also has a large separate subsidiary (First American Exchange) that does 1031 exchanges in Texas. Confused yet? No need to be. If you’re looking for a solid qualified intermediary in the Dallas area with backing from a large company, Texas Escrow Company is a great choice.

Originally started in the early 1990s, Republic Title has been serving both commercial and residential real estate owners in the Dallas area and beyond for over three decades. They have a very large team supporting the Texas Escrow company, and their services go far beyond just the 1031 exchange. For example, in the DFW area alone they have a team of eleven in-house lawyers and underwriters ready to help. This is in addition to their 28 commercial closing teams who help with commercial closings at all times.

Services Texas Escrow Company Offers

Owing to their broad and deep experience in the residential and commercial real estate sectors of Texas, Texas Escrow Company offers nearly every type of 1031 exchange service. On their website alone, they advertise that the team is fully enabled to handle a delayed, reverse, or construction exchange. Since simultaneous exchanges are usually considered the easiest type of 1031 exchange, we are willing to assume they can handle that type as well.

Here’s the full list of services Texas Escrow Company offers:

  • Delayed 1031 Exchange
  • Reverse 1031 Exchange
  • Improvement 1031 Exchange (Also called construction or build-to-suit exchange)
  • Simultaneous 1031 Exchange

Texas Escrow Company Experience and Financial Stability

The team at Texas Escrow company has been conducting 1031 exchanges for decades, and you can trust they’ve seen nearly every type of exchange. Carla Janousek is the primary qualified intermediary at the Dallas-Fort Worth office of Texas Escrow Company, and has a great reputation. She is considered honest, knowledgeable, and works hard for her clients.

Since Texas Escrow Company is a subsidiary of Republic Title (which itself is a subsidiary of First American Title), this gives them significant financial backing. Republic Title is one of the largest titles companies in the state of Texas, and is not going out of business anytime soon. Additionally, they’re backed by First American, which is possibly the largest real estate services company in the United States. Either way you slice it, Texas Escrow Company is here to stay and you can know your funds aren’t going anywhere during your 1031 exchange in Texas.

Texas Escrow Company Locations and Customer Service

Since they focus on the state of Texas, Texas Escrow Company keeps its office in the Uptown neighborhood of Dallas. This is relatively accessible whether you’re coming from Dallas or Fort Worth, and is a great advantage over other more remote exchange companies.

We have found Carla and Hellen (the primary operators of Texas Escrow Company) to be very responsive to inbound requests for information. They have a lot of experience in various scenarios relating to the 1031 exchange, and are happy to share their wisdom with potential customers. They are also accessible by phone/email if you are not local to the Dallas-Fort Worth area.

Here is the location for their Uptown Dallas office:

Dallas – 2626 Howell Street,10th Floor Dallas TX 75204

Asset Preservation Inc (API)

api one of the best 1031 exchange companies in texas

One of the largest 1031 exchange companies in the United States, Asset Preservation Inc (also known as API) also has a strong presence in the state of Texas. With two extremely knowledgeable qualified intermediaries, one in Austin and the other in Houston, if you’re anywhere near these cities you should give API a call for your next 1031 exchange. Both Cindy Pham and Greg Lehrmann have been in the Texas real estate and 1031 exchange industry for decades, and will be a positive influence on your potential exchange.

API is headquartered in Roseville, CA which is outside of Sacramento. That said, they have an extremely strong team and presence both in the state of Texas and around the country. Additionally, they’re also a subsidiary of Stewart Title Company, one of the larger real estate services companies in the United States. With this financial backing, you can rest assured your exchange funds are secure and protected in the event of an emergency.

Services API Offers in Texas

API offers one of the widest varieties of exchange services in Texas of any 1031 exchange company we’ve spoken with. In Texas and around the US, they only focus on 1031 exchanges, not other aspects of real estate. There are some 1031 exchange companies that will attempt to upsell other services. With API, you know that they have a single goal in mind – helping you with the 1031 exchange in Texas.

API offers the following services in Texas:

  • Delayed or Deferred Exchange
  • Reverse Exchange (Specialized Commercial Division within API)
  • Improvement Exchange (Also called construction or build-to-suit)

Asset Preservation, Inc (API) Experience and Financial Stability

Since API has been around since the early 1990’s and has a large staff of qualified intermediaries, they have experience. Additionally, since they are owned by Stewart Title, they have a large staff of lawyers, accountants, and other real estate professionals to draw experiences from. Like nearly every other 1031 exchange company (the reputable ones, at least), API does have both a fidelity bond and errors and omissions coverage. This coverage is set at $1M for each.

Interestingly, API also offers its clients a Letter of Assurance included with any 1031 exchange. This assures you of API’s performance being satisfactory during your 1031 exchange in Texas.

API Exchange Locations and Customer Service

Any investor in the state of Texas considering a 1031 exchange should talk to a local API qualified intermediary. Since they have two separate offices, one in Austin and the other in Houston, they cover a decent swath of the state. They offer free consultations and ensure that doing a 1031 exchange in Texas will actually save you money.

Here are the two office locations Asset Preservation keeps in the state of Texas:

Austin – 901 S. MoPac Expy, Bldg III, Ste 100 Austin TX 78746

Houston – 1980 Post Oak Boulevard, 2nd Floor Houston TX 77056

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