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Construction Exchange Cost Calculator
Construction exchanges fund build-out pre-acquisition. This calculator sizes the premium.
Total construction exchange cost
$217,000
Carry total
$160,000
Direct legal/QI cost
$57,000
How the math works
Carry = months × monthly. Total = carry + QI fee + legal.
Build-to-suit 1031 structures work best when the land cost equals the exchange proceeds and construction is short (under 4-6 months). Stretching scope or timeline past those parameters often makes a direct forward 1031 into stabilized asset the better alternative.
How to Use
- Enter project value at completion.
- Enter QI/improvement trustee fee.
- Enter construction months.
- Enter monthly carry.
- Enter additional legal.
- Read total construction exchange cost.
Frequently Asked Questions
When used?
Exchange proceeds insufficient to match replacement value unless improvements made. Common in ground-up development: buyer wants to exchange into a parcel + build structure. Trustee holds title during build-out.
180-day limit?
Same 180-day limit applies. Improvements must be completed within 180 days. Partial completion ok, but value only counts when actually placed in service before deadline. Scope creep or delays can invalidate exchange.
Practical limits?
Small improvements (under $500k): economical. $500k-$2M: gets complex. $2M+: usually better served by reverse exchange with preexisting title. Coordinate with experienced 1031 attorney before structuring.
Who owns this risk — sponsor or lender?
Construction risks are typically shared: hard-cost overrun owned by sponsor (via completion guaranty), soft-cost and delay risks shared per contract, force-majeure excused but bears owner carry cost. Document risk ownership in the loan agreement and GC contract before closing. Disputes get expensive when roles are unclear. Institutional deals spell out every allocation in writing.
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