1031 Exchange Financing — Latimer Street Capital

1031 Exchange Financing

The clock starts
when your property sells.
Be ready before it does.

DSCR financing for 1031 exchange replacement properties in the Philadelphia corridor and nationwide. Pre-approved in 24 hours. Close in 21 days. No tax returns required. We coordinate directly with your Qualified Intermediary so your exchange doesn't fail on financing.

Get Pre-Approved Now See How It Works

180

Days to Close Exchange

Days to Fund With DSCR

40%

Of Exchanges Fail — Often Financing

The Problem

Why 1031 Exchanges Fail on Financing

You found the right replacement property. The QI has your funds. The clock is running. Then the lender says they need 60 days. Or your tax returns complicate the file. Or the lender doesn't understand how exchange funds work at closing. This is how exchanges fail — not from bad planning, but from the wrong financing partner.

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Conventional Lenders Are Too Slow

Traditional mortgages take 45–60 days. After 45 days identifying your replacement property, you may have only 30 days left to close. Conventional lenders routinely blow exchange deadlines.

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Tax Returns Create Complications

Most 1031 investors own property in an LLC and have complex tax returns. Conventional underwriting can't handle what DSCR treats as a non-issue — qualifying on rental income only.

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Mortgage Boot Triggers Tax Liability

If your new loan is smaller than your prior mortgage, the IRS treats the debt difference as taxable gain — even if no cash changed hands. Getting the loan structure right matters.

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Lender and QI Don't Coordinate

Your QI holds the exchange funds. Your lender handles the mortgage. When they don't speak the same language, closings get complicated. We coordinate both sides so nothing falls through.

The Solution

Why DSCR Is the Natural Financing Vehicle for 1031 Exchanges

DSCR loans were built for exactly this situation — investment properties, LLC ownership, rental income qualification, and fast closings. Every feature aligns with what a 1031 exchange requires.

Satisfies the IRS Debt Replacement Requirement

To fully defer capital gains, your new loan must equal or exceed the debt on the property you sold. DSCR financing directly satisfies this requirement — preventing mortgage boot and protecting your full tax deferral without requiring additional cash out of pocket.

Closes in 21–30 Days — Meeting the 180-Day Window

After spending 30–45 days identifying replacement property, you may have 45–60 days left to close. DSCR loans close in 21–30 days. Conventional mortgages routinely take 45–60 days. We protect your timeline from the moment you call us.

III

No Tax Returns — No W-2s Required

DSCR loans qualify on the replacement property's rental income — not your personal income, not your tax returns, not your employment history. Self-employed investors and LLC owners qualify without the documentation headaches that derail conventional financing.

Closes Directly in Your LLC

Title goes directly into the LLC. No personal-to-entity transfer after closing, no deed complications, no additional legal costs. The loan, the deed, and the entity are all aligned from day one — exactly how investment property should be structured.

Preserves Borrowing Capacity for Future Acquisitions

Because DSCR loans don't count against your personal DTI, completing a 1031 exchange through DSCR financing leaves your conventional borrowing capacity intact for primary residence or other future financing needs.

Pennsylvania Investors: A Critical Update

Pennsylvania only recognized 1031 exchanges in 2022 under Act 53 — making it one of the last states to adopt this strategy. Many Philadelphia corridor investors still don't know a PA 1031 exchange is available to them, or that it now applies at the state level. If you've been deferring federal gains without knowing PA recognition was available, you may have an untapped opportunity to reclaim those prior deferrals. Talk to your CPA and your Qualified Intermediary before your next sale.

How It Works

The 1031 + DSCR Process, Step by Step

The most important thing you can do is call us before your property lists — not after. Pre-approval takes 24 hours and costs nothing. It means the day you identify your replacement property, financing is already in motion.

Before Day 1 — Before You List

Get Pre-Approved While Your Property Is Still on Market

Call or email us before your relinquished property even lists. We pre-approve you for replacement property financing in 24 hours. This costs nothing and means you start the exchange already knowing exactly what you can finance.

→ You call us

Day 1 — Sale Closes

QI Receives Your Exchange Proceeds

Your Qualified Intermediary holds the sale proceeds. The 45-day identification clock starts. You already have a pre-approval letter in hand — the financing question is answered before the clock even starts.

Days 1–45 — Identification Period

Identify Your Replacement Property

You identify up to three replacement properties with your realtor. Before you submit an offer, call us — we'll confirm the specific property fits your DSCR approval and run the loan structure to verify no mortgage boot exposure.

→ You call us before making an offer

Day 46 — Offer Accepted

DSCR File Opened — 21-Day Clock Starts

We open the loan file immediately. No tax returns. No W-2s. No employment verification. We need the property address, rent schedule, and your entity documents. We order the appraisal and coordinate with your QI on fund transfer timing.

Day 67 — Closing

Exchange Complete — Tax Deferred

QI transfers exchange proceeds to the closing table. DSCR loan funds simultaneously. Title goes directly into your LLC. Exchange completed with 113 days to spare. Capital gains fully deferred. Loan structured to meet or exceed prior debt — zero mortgage boot.

→ Exchange complete ✓

+6mo

6–12 Months Later — Optional

DSCR Cash-Out Refinance — Tax-Free Liquidity

Once the replacement property seasons, a DSCR cash-out refinance lets you access equity as loan proceeds — not income, not a taxable event. The cycle continues: deferred the gain, refinanced for liquidity, ready for the next acquisition.

→ Two deals, same borrower

Deal Scenario

A Delaware County Investor Trades Up

Here's how a typical Philadelphia corridor 1031 exchange looks when DSCR financing is structured correctly from the start.

Relinquished Property → Replacement Property

Illustrative Scenario

Property sold (Delaware County SFR)$520,000

Original purchase price (2018)$280,000

Existing mortgage balance$185,000

Capital gain (untaxed via 1031)$240,000

Exchange proceeds to QI~$320,000

Replacement property (2-unit, Media PA)$750,000

DSCR loan (75% LTV)$562,500

Loan vs prior debt (IRS req: ≥$185K)$562,500 ✓ No boot

Exchange proceeds used as down payment$187,500

Monthly rent (2 units)$3,800

DSCR ratio1.18 ✓

Close timeline24 days ✓

The result: $240,000 in capital gains fully deferred. Investor moved from a single-family rental into a 2-unit cash-flowing property with $187,500 of exchange equity deployed. No tax returns requested. Loan structured at $562,500 — well above the prior $185,000 debt, eliminating any mortgage boot exposure.

Common Questions

1031 Exchange Financing — What Investors Ask

Yes — and we strongly recommend it. DSCR pre-approval takes 24 hours and requires only basic information about you and the type of property you're looking to acquire. Having a pre-approval letter before your relinquished property closes means the day you identify replacement property, financing is already in motion. This is the single most important thing you can do to protect your exchange.

That's fine. We pre-approve based on your profile — FICO, entity structure, and general property type. When you identify the specific replacement property, we confirm it fits your approval within 24 hours. You have up to three properties identified under the standard exchange rules — we can run the DSCR analysis on each before you commit to an offer.

The exchange proceeds are used as your down payment. The DSCR loan funds the balance of the purchase price. At closing, your QI transfers the exchange proceeds to the closing agent simultaneously with the lender funding the DSCR loan. We coordinate directly with your QI to ensure both happen together on the same day. Important: lender fees cannot be paid from exchange funds — those come out of pocket. Your QI can confirm the specific items that are and aren't payable from exchange proceeds.

Mortgage boot occurs when the debt on your replacement property is less than the debt on the property you sold. The IRS treats that difference as a financial gain — and it becomes taxable even if no cash changed hands. We structure your DSCR loan to equal or exceed your prior mortgage balance, eliminating boot exposure. This is one of the most common errors in 1031 financing and one of the first things we verify before submitting any exchange loan.

Yes — Pennsylvania recognized 1031 exchanges in 2022 under Act 53, aligning with federal law. Prior to 2022, Pennsylvania taxed capital gains on investment property sales that qualified for federal deferral. This is relatively new and many PA investors are still unaware that state-level deferral is now available. If you've completed federal 1031 exchanges in Pennsylvania since 2022, you should confirm with your CPA that you also captured the state-level benefit.

Yes on multifamily — 2–4 unit residential properties qualify for DSCR financing and are valid 1031 replacement properties. For short-term rentals, DSCR financing is available with AirDNA income qualification, but there are specific IRS requirements for the property to qualify as a valid 1031 replacement — the property must be rented to non-related parties for at least 14 days per year and your personal use must be limited. Always confirm the STR rules with your QI and CPA before proceeding.

Referral Partners

We Work Alongside Your Advisory Team

We don't replace your QI, CPA, or attorney — we complete the team. If you're a professional who works with real estate investors, we'd welcome a conversation about how a dedicated DSCR financing partner can support your clients' exchange outcomes.

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Qualified Intermediaries

We pre-approve your clients before the exchange clock starts and coordinate with your office on fund transfer timing at closing. Exchanges close faster and cleaner when financing is ready before Day 1.

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CPAs & Tax Advisors

When your client needs a 1031 exchange, they also need financing that matches the debt replacement requirement exactly. We structure the DSCR loan specifically around your tax strategy.

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Real Estate Attorneys

We understand how exchange documentation flows through the closing process. Our lenders accept QI-coordinated closings and are familiar with exchange-specific settlement statement requirements.

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Investment Property Realtors

Your investor clients can make stronger offers knowing their 1031 replacement financing is pre-approved and closeable in 21 days. No conventional lender can match that timeline for investment property.

Start Before the Clock Does

The best time to contact us is before your property lists. The second best time is right now. Pre-approval takes 24 hours and costs nothing.

Pre-Approval in 24 Hours Close in 21 Days No Tax Returns Required Direct QI Coordination

Get Pre-Approved → Call (856) 291-6920

Get Pre-Approved

Start the Conversation

Tell us about your situation and we'll be in touch within 24 hours. No commitment, no cost — just a straight answer on whether DSCR financing works for your 1031 replacement property.

Prefer to call? Reach Michael directly at (856) 291-6920 · michael@latimerstreet.com

The clock startswhen your property sells. Be ready before it does.