Improvement Exchange

Improvement exchange support helps Fort Worth, Texas investors manage capex budgeting and draw inspection coordination when a 1031 exchange involves building improvements into the replacement property using exchange funds, a structure sometimes called a construction or build to suit exchange. Because improvements must be completed and title must reflect the improved value before the one hundred eighty day deadline expires, this structure adds a construction management layer on top of the standard exchange timeline that requires careful budgeting and inspection discipline.

Budgeting Capex Against The One Hundred Eighty Day Clock

All construction work intended to increase the value counted toward the exchange must be substantially complete, and title to the improved property must transfer to the investor, before day one hundred eighty, which means the construction budget and schedule need to be realistic from the outset rather than optimistic. We help investors build a capex budget that accounts for typical construction delays, confirming that even a conservative schedule leaves margin before the deadline, since unfinished improvements at day one hundred eighty are valued at whatever stage of completion exists on that date, not the intended final value.

Coordinating Draw Inspections With The Exchange Accommodation Titleholder

Because the Exchange Accommodation Titleholder typically holds title to the property during construction in an improvement exchange, exchange funds are released to pay contractors through a draw process that requires inspection and documentation at each stage, similar to a construction loan draw schedule but administered through the Qualified Intermediary rather than a bank alone. We coordinate these draw inspections, confirming completed work matches the budget line item being paid, and we track cumulative spend against the total exchange funds available so the investor can see clearly how much value has been added to the property at any point in the construction timeline.

Investors in Fort Worth pursuing an improvement exchange, whether adding tenant improvements to a vacant retail box near the Stockyards or building out infrastructure at an industrial site near Alliance, benefit from having construction milestones tracked against the exchange deadline rather than managed separately from it, since a delay in either the construction schedule or the exchange documentation can jeopardize the transaction. We coordinate closely with the general contractor, the Exchange Accommodation Titleholder, and the Qualified Intermediary throughout the improvement period.

We also help investors evaluate contractor selection specifically for improvement exchange projects, since not every general contractor is familiar with the draw process required when funds flow through a Qualified Intermediary and Exchange Accommodation Titleholder rather than a conventional construction lender, and a contractor unfamiliar with this structure can inadvertently slow the draw approval process through incomplete documentation. We review the contractor's proposed schedule of values, which breaks the total contract price into line items corresponding to specific phases of work, and confirm this schedule aligns with how the Qualified Intermediary expects to review and approve draw requests, since a mismatch between the contractor's invoicing structure and the exchange documentation requirements can create unnecessary friction during construction. Permitting timelines are reviewed separately from construction timelines as well, since a delay in obtaining a building permit from the relevant Fort Worth or Tarrant County jurisdiction can push back the start of construction even before the first draw is requested, and we help investors build this permitting lead time into the overall schedule from the outset. We also track material lead times for any long lead items specific to the project, such as specialized HVAC equipment or custom storefront systems, since supply chain delays on a single critical material can affect the overall construction timeline even when labor and other materials are proceeding on schedule.

We also help investors think through what happens to any unused exchange funds if the improvement project comes in under budget, since funds remaining after construction is complete and the deadline has passed become taxable to the investor just as they would in a standard exchange with excess unused proceeds, which is a planning consideration worth discussing with the investor's CPA before finalizing the construction budget.

This service provides educational and coordination support only, working alongside the investor's own attorney and certified public accountant, and it is not tax, legal, or investment advice. Because Texas has no state income tax, the deferral achieved applies to federal capital gains tax and federal depreciation recapture only.