A 1031 exchange requires a qualified intermediary to hold your proceeds for up to 180 days, keeping the money out of your hands so you avoid immediate taxes. The intermediary earns about 6% interest on the funds and charges 1-2% to facilitate the swap from your old property to the new one.
Again, to Cicely's point, why not just do a 1031? You can, 100%. In your situation, Katia, it's rough for you to do, but if you did a 1031, and we're going to have people here to talk about 1031s, you go with a 1031, you have to pay people to manage your 1031.
You can't manage it by yourself?
Nope. Called a qualified intermediary. Because here's how the tax laws work. If you take the money before you invest it, you have to pay your taxes on it. As soon as it becomes yours, game's over. You get a tax bill. So then that's why you got to invest. So that by the end of the year, you hand that to your tax man and you go, hey, here's all my deductions. I'm not paying shit. Thank you.
And if you use that person to be the go-between, then you're like, I never touched the money.
In a 1031, you have to use what's called a qualified intermediary who takes, basically takes your money, holds it for 180 days. And while he has it, he's making 6% interest on it. And then at the end, when he, when he helps you move your money from point A to point B, takes 2%, 1 to 2%.
