A 1031 exchange bridge loan exists because the IRS clock does not care that your bank needs 45 days for an appraisal. You sold an investment property, the qualified intermediary is holding proceeds, and you must identify within 45 days and close replacement property within 180 days. Conventional debt is often too slow, too clean-collateral, or too income-driven. Hard money on the replacement — 8.99%–13.5% interest-only, 7–10 business days on complete files — is how sponsors actually hit the deed-recording date.
This is a lending page, not a tax opinion. Read the IRS materials on like-kind exchanges with your CPA. We fund the real estate. Your QI runs the exchange.
Educational timing write-ups already on the site: 1031 and hard money on the same deal and DMV 1031 bridge timing. Use those for walkthroughs. Use this page when you need a replacement-property bridge quoted.
Submit a purchase/bridge scenario with the relinquished closing date, identification list, QI contact, and replacement contract. Fix-and-flip intake if the replacement needs rehab draws.
The two clocks
| Clock | Owner | What happens if you miss it |
|---|---|---|
| 45-day identification | IRS / QI | Exchange fails on that sale; proceeds become taxable |
| 180-day close (or tax-return due date, if earlier) | IRS / QI | Same — late deed does not “almost” qualify |
| Bridge term (6–24 months) | Lender | Balloon due; see hard money loan maturity refinance |
Bridge debt does not pause the 45/180 rules. It only lets you buy inside them. IRC section 1031 still requires like-kind real property held for investment or productive use in a trade or business. Personal residences and flipping inventory held primarily for sale are fact fights for counsel, not for a term sheet.
How the money actually stacks
Typical delayed exchange:
- Relinquished property closes. QI holds net proceeds. You never touch them.
- You identify replacements (three-property rule, 200% rule, or 95% rule — QI’s form).
- You contract a replacement that may need speed, rehab, or an entity close.
- Bridge / hard money funds a large share of the purchase (and rehab holdback if the scope is real).
- QI equity drops in as your down payment at replacement closing.
- After you stabilize or sell, you retire the bridge — often via DSCR at 5.75%–10.5%.
You must still meet equal or greater value and debt-replacement tests or you take boot. That math is the CPA’s. Our job is whether the replacement is financeable collateral with a defined payoff.
45-day identification rescue
“Identification rescue” is not an IRS extra inning. It means you still have days on the 45, you have (or can get) a contract, and you need a lender who can close before day 180 — ideally with enough slack that TOPA, a probate hitch, or a bad appraisal does not kill the exchange.
What we need in that window:
- Relinquished HUD/CD and day-0 date
- QI name and written confirmation they can wire to the replacement closing
- Identification notice (or draft) that matches the contract
- Replacement contract, access, and entity docs
- If rehab: scope, budget, and an honest duration that does not assume the 180-day clock will wait on a historic commission
If you are on day 40 with no contract, call the QI and counsel first. A lender cannot identify property for you.
Reverse exchanges and EAT financing
A reverse exchange buys the replacement before the relinquished sells. In practice, an exchange accommodation titleholder (EAT) often parks one of the properties so you are not holding both in a way that blows the safe harbor. Ask your QI how they implement the IRS reverse-exchange safe harbor (commonly discussed under Rev. Proc. 2000-37) — that is tax counsel’s file, not a lender product name on a term sheet.
We will look at financing the real estate in that structure when:
- Counsel and the QI have already chosen who takes title (EAT vs taxpayer)
- Our mortgage sits in a position we can live with
- There is a defined sale of the relinquished asset and a defined payoff of our loan
- Insurance and recourse match the borrower we are actually underwriting
If the reverse is still “we heard you can park it in an LLC,” that is not a file. Bring the QI’s reverse-exchange agreement.
What kills a 1031 bridge
- QI not in the loop. Loan docs, guarantees, and “cash back” at closing create boot or disqualify the exchange.
- Rehab longer than the remaining 180 days if your tax plan required the replacement to be acquired and improved inside the window. Many sponsors acquire early and rehab after; that is a tax-plan choice.
- Occupied DC replacement without a TOPA calendar. A 180-day clock and a tenant-opportunity period are not friends.
- Value gap. QI equity plus our max LTC still does not reach the purchase price. Gap capital or a cheaper replacement — not a wish for 100% of a thin ARV.
- Inventory vs investment. If you always flip in 90 days, counsel may not call it 1031 property. We can still finance a flip; we will not pretend it is an exchange.
Risks and benefits in plain language: 1031 risks and benefits. Opportunity Zone is a different statute — Opportunity Zones 2.0.
Worked example: Indiana duplex into Chicago two-flat
Sold Indianapolis duplex. QI holds $190,000. Identified a Bridgeport two-flat at $420,000 needing $85,000 rehab (RLTO turnover, kitchens, electric). Day 28 of 45.
| Piece | Amount |
|---|---|
| Purchase | $420,000 |
| Rehab holdback | $85,000 |
| QI equity | $190,000 |
| Bridge / hard money (purchase + rehab) | Sized to LTC/ARV caps at 8.99%–13.5% IO |
| Sponsor cash if leverage binds | Closing costs, reserves, any gap |
Close replacement by day 70, not day 175. Rehab can run past day 180 on many tax plans because the acquisition already happened. Confirm that with the CPA before you brag about it. Then exit to Illinois DSCR when both units lease. Related: Chicago two-flat vs SFR · Chicago BRRRR.
Worked example: Maryland sale into DC row, clock too tight
Relinquished Prince George’s County rental closed day 0. Identified a Capitol Hill row on day 41. Seller wants 21-day close. Conventional 30-year will not make it. Occupied basement.
Hard money can meet 21 days if title is clean. TOPA may still blow the exchange if you cannot record what you identified. Either identify a vacant replacement as a backup under the three-property rule, or do not start a DC occupied deal on day 41. DMV product hubs: DC hard money · Maryland hard money · DC vs MD vs VA.
Worked example: reverse exchange on a drop-in replacement
You found the replacement first — a stabilized 4-unit in Columbus — and the relinquished Chicago asset is under contract to sell in 70 days. QI sets up a reverse. EAT takes the Columbus deed. We fund the Columbus purchase in the EAT’s or taxpayer’s structure per counsel. When Chicago sells, the exchange completes and you refinance Columbus to DSCR or keep the bridge until leases prove out.
If Chicago falls through, you own (or the EAT owns) Columbus with a balloon. That is why reverse files need a backup payoff: sale of Columbus, refinance, or enough liquidity to carry. Columbus hard money for the Ohio collateral; Chicago hard money for the relinquished side.
Underwriting — same collateral rules, extra parties
Replacement bridges still follow published programs: up to high LTC on qualified fix-and-flip files, ARV caps, 6–12 month typical term, 7–10 business day closes, credit-flexible (no minimum FICO on select programs). Extra 1031 items:
- QI wire instructions and a prohibition on sending “your” proceeds to your operating account
- Identification exhibit matching the legal description
- Entity that will take title (must match QI paperwork)
- Reverse: EAT documents and who is the borrower/guarantor
Bridge loans for investors is the generic product. What is a hard money loan? is the mechanic. Loan process is the file order.
Boot, debt, and the refinance after
If the replacement mortgage is smaller than the relinquished mortgage, the difference can be boot even if cash is all in the QI. Sponsors sometimes over-leverage the replacement on purpose to replace debt. That is a tax structure conversation. From our side, extra leverage still has to fit LTC and ARV. A 1031 is not a waiver of physics.
After stabilization, hard money to DSCR is the usual hold exit. If you instead sell the replacement quickly, you may have a 1031 problem and a flip. Talk to the CPA before you list.
If the bridge itself is what is maturing later, that is the maturity refinance page — the 180-day crisis is over; the balloon crisis is new.
Identification rules the QI will actually use
Sponsors quote “identify three properties” and stop. The QI’s form usually offers three safe-harbor tests (see the IRS like-kind materials your intermediary uses):
- Three-property rule — up to three properties, regardless of value
- 200% rule — any number of properties as long as total fair market value identified is ≤ 200% of the relinquished property
- 95% rule — you can identify more, but you must acquire 95% of the aggregate identified value
A 45-day rescue often fails because someone identified one dream DC row and nothing else. When TOPA or a financing contingency kills that one, the exchange dies. Identify a vacant PG County 2–4 unit and a Baltimore row as backups if the primary is a political-science project. Baltimore collateral: Baltimore hard money.
Revoke-and-replace identification only works inside the 45 days and only the way the QI documents it. Do not “update the list” in an email to your realtor on day 46.
Improvement (build-to-suit) exchanges vs buying a wreck
Some QIs will structure an improvement exchange so construction on the replacement occurs while the EAT still holds title, aiming to land equal-or-greater value. That is a specialized QI product with construction draws, inspections, and a harder 180-day fuse. It is not the same as “we bought a shell on day 160 and we will rehab for a year.” If you need draws on a shell you already own, that is ordinary rehab / fix-and-flip after the exchange already succeeded or failed.
Tell us on day one which of those you think you are in. The term sheet and the QI agreement have to match.
Drop-and-swap, partnerships, and who the borrower is
Exchanges involving a TIC, partnership, or LLC membership interest are where files stall. We lend to an entity that can mortgage real property. If the relinquished asset sits in a partnership that has not completed a drop-and-swap before the sale, that is counsel’s emergency, not a bridge overlay. Bring organizational charts. Guarantors still sign. LLC vs personal name covers the boring case; 1031 partnership splits are the un-boring case.
Failed exchange fallback
If you miss 45 or 180, the QI will usually return funds (minus their fee) as a taxable sale. You may still want to buy the replacement — just without 1031. We can often finance that purchase as a normal bridge. Do not hide a blown deadline hoping the lender “won’t notice.” Title and the QI’s letter will notice. A honest “exchange failed, still buying” file is underwritable. A confused boot file is not.
If you close the replacement on time and later cannot refinance the bridge, you are on the maturity clock, not the IRS clock. Different rescue.
Document checklist (print this)
- Relinquished closing statement and day-0 calendar
- QI engagement and wire instructions
- Identification notice
- Replacement PSA, amendments, access
- Entity docs for the title-holding entity
- Reverse only: EAT agreement and who signs our note
- Scope/budget if rehab
- Proof QI equity is enough for the down payment we are underwriting to
- CPA or counsel letter if the structure is reverse, improvement, or partnership
Loan eligibility is the generic credit/asset list. 1031 adds the QI stack on top.
Related reading
- IRS like-kind exchange tax tips
- 1031 + hard money timing (blog)
- DMV 45/180 guide
- Bonus depreciation and cost seg — different tax tool, often stacked by the same sponsors
- Accountant partner guide if you are the CPA sending the file
Pre-qualify · submit purchase · (833) 264-7776
What we need from the QI on the closing call
Replacement closings fail in the last 48 hours when the QI’s wire does not match the settlement statement. Send the draft HUD/CD to the QI before the day of closing. Our loan cannot be the bucket that “temporarily” holds exchange funds. If the title company wants to balance the file by sending leftover cash to the borrower, stop and call the QI — that leftover may be boot.
On reverse exchanges, confirm who signs affidavits, who is on the insurance, and whether our mortgage is against the EAT or the taxpayer. Mismatch here delays recording past day 180 even when everyone “meant well.”
Foreign-national and ITIN sponsors exchange too. The real-estate collateral rules do not change; the entity and OFAC stack do. See foreign national DSCR for the hold side after the bridge. The 45/180 calendar does not care about visa status.
Nationwide means the replacement can be in another state from the relinquished property. Like-kind is about real property for real property, not Maryland for Maryland. Title customs still change at the state line — Illinois judicial foreclosure inventory is not Baltimore ground rent. Budget local counsel on both legs.
If the replacement is a short-term rental, confirm local STR rules before you identify it. A 1031 into an illegal Airbnb is a tax plan with a zoning hole. Short-term rental laws and DSCR for STR are the hold-side pages; identification still has to name a legal parcel.
Sellers sometimes want you to “just use a conventional loan so the QI is simpler.” Conventional is simpler until the appraisal calendar blows day 180. If the listing agent is allergic to hard money, send hard money vs cash offer and a proof of funds letter. Certainty of close is the product the 1031 actually needs.
Construction-to-perm on a new build replacement is new construction loans, not a 6-month flip note. Spec timing and 180 days fight. Identify a standing building unless the QI has an improvement-exchange machine already built.
If the identification list includes a property that is still in probate, read hard money on probate property before you name it. Open probate on title is not a 7-day close.
If you already identified a replacement that will not close, call the QI the same day. A bad identification that still sits on the notice can block a better one if you are past the ability to amend. That is a QI procedure, not a lender overlay — but we cannot fund a contract that is not on the list.
Not tax, legal, or accounting advice. Rates, terms and conditions offered only to qualified borrowers and are subject to change without notice. Jaken Finance Group finances non-owner-occupied investment property.