Planning to roll your 1031 exchange into a new build in Parker? The calendar is strict, and the numbers behind metro district taxes and tap fees can shift your returns more than you expect. You want clarity on the 45 and 180 day rules, how to structure a build-to-suit, and what local levies and utility fees mean for cash flow. This guide walks you through the essentials, plus a due diligence checklist tailored to Parker and Douglas County so you can move forward with confidence. Let’s dive in.
What a 1031 allows and limits
A delayed 1031 exchange has two hard deadlines: identify your replacement property within 45 days after you transfer the relinquished property, and acquire it within 180 days. These timelines are strictly applied, so your planning has to be precise.
Identification in 45 days
You can identify up to three properties, or you can use alternative 200 percent or 95 percent rules. When you are targeting a Parker lot or a property with incomplete construction, identify it with enough specificity so it is clear what you intend to buy. Use the legal description and parcel number. Vague identification raises audit risk.
Acquire within 180 days
If your replacement will be a new build, you must still acquire title to the real property within 180 days. The house does not need to be completed by day 180, but title must vest properly in you or in an approved accommodator structure. Your qualified intermediary can help you align title and funding so you stay compliant.
Use of proceeds and avoiding boot
All exchange proceeds should be reinvested into like-kind property. Paying for construction, metro district assessments that are capitalized, and tap fees can be an appropriate use of exchange funds when structured through your qualified intermediary or an exchange accommodation titleholder. If cash is taken out or proceeds are not fully reinvested as required, you can trigger taxable boot.
Build-to-suit structures that work in Parker
You have several common pathways when your replacement is a new build in Parker. Each has different timing, title, and control features.
- Buy a completed home or a lot with finished improvements, then close within 180 days.
- Buy an improved lot and build after closing. You must hold title by day 180, then complete construction on your timeline.
- Use an Exchange Accommodation Titleholder or a similar accommodator structure so construction can continue while you meet identification and acquisition deadlines. This can help align draw schedules and tap fee payments with exchange rules.
Metro districts: taxes that affect returns
Many Parker neighborhoods sit within Colorado Title 32 special districts, often called metro districts. These districts fund infrastructure like roads, water and sewer, parks, and amenities. They can issue bonds, levy property tax mill levies for debt service and operations, and charge assessments or fees.
Why metro districts matter
- Bonded debt mill levies can be material for newer developments. These mills repay infrastructure bonds and can be higher than areas without district debt.
- Operations and maintenance levies cover services such as landscaping, snow removal, and facility upkeep.
- Special assessments or fees may appear one time or spread over several years. These can be levied after closing and affect your cash flow.
For investment property, higher levies reduce net operating income and can affect your cap rate assumptions. For owner-users, they increase carrying costs.
What to verify before you buy
- Current mill levy and the breakdown of taxing entities for the parcel.
- District annual reports, service plans, and any bond schedules that indicate outstanding or planned debt.
- Any recorded or pending special assessments, and whether additional bonds are planned.
Local sources include Douglas County Assessor and Treasurer records, the Town of Parker planning or engineering teams for active district listings and service plans, and each district’s annual reports.
Tap fees: one-time costs that matter
Tap or capacity fees are one-time charges to connect to water, sewer, and related systems. In Parker, the authority depends on location. Parker Water and Sanitation District serves large areas, while some neighborhoods are served by other districts or the Town. Each authority publishes its own fee schedule and rules.
- Cash flow impact: Tap fees are often due at permit, closing, or at meter installation. That means you may have a significant cash need before any rent begins.
- Basis and depreciation: Tap and capacity fees are capitalized into basis, which improves depreciation over time. This helps long term, but it does not change the near-term cash requirement.
- Exchange integration: If you intend to use exchange proceeds to pay tap fees, route the payments through the qualified intermediary or the accommodator structure as your exchange agreement allows.
Who pays and when
Builders and buyers often negotiate who pays tap fees. In spec builds, the builder commonly pays and recovers the cost through price. In custom builds, the buyer may pay directly at permitting. Your contract should state who pays and when, because this affects both timing and tax treatment inside a 1031.
Due diligence checklist for Parker 1031 new builds
Use this short list to pressure test your plan before you assign 1031 proceeds to a build.
Timing and 1031 structure
- Confirm your 45 day identification and 180 day acquisition deadlines with your qualified intermediary.
- Prepare a written identification that uses legal descriptions and parcel IDs.
- Decide how title will vest by day 180, whether in your name or via an Exchange Accommodation Titleholder supported by your qualified intermediary.
- Clarify how exchange proceeds will be disbursed for construction and tap fees, and document it in your exchange agreement.
District and tax diligence
- Obtain district annual reports, the service plan, any bond disclosures, and the current debt schedule.
- Pull the current mill levy and tax entity breakdown from Douglas County records for the parcel or for similar lots.
- Request a metropolitan district disclosure and confirm whether any special assessments are recorded or planned.
- Ask whether the property is subject to reimbursement or reinvestment agreements that could add charges later.
Utilities and tap fees
- Get written tap and connection fee schedules from the relevant water, sewer, and stormwater providers.
- Confirm meter availability and estimated lead times.
- Verify whether tap fees are due at closing, permit, or meter installation, and build that into your funding plan.
Construction and permitting
- Request a preliminary cost breakdown and timeline from your builder or general contractor.
- Check Town of Parker permitting and plan review timelines, plus required approvals or inspections.
- Verify draw schedules and make sure the qualified intermediary or accommodator can release funds without risking exchange compliance.
Contract and closing mechanics
- State clearly in the contract who pays tap fees and special assessments.
- If using an accommodator to hold title during construction, confirm the provider has Colorado build-to-suit experience.
- Confirm how purchase price will be allocated between land and improvements. Capitalized tap fees should flow into basis.
Financial modeling and sensitivity
- Model your pro forma with current and projected district mill levies, ongoing district fees or O and M assessments, one-time tap fees and timing, and any HOA dues.
- Run sensitivities that test a 0.5 to 1.0 percent change in effective tax and levy costs, as well as a scenario for an unplanned special assessment.
How levies and fees change returns
- Ongoing mill levies increase your property tax line, which reduces NOI on income property and can push down valuation because value is tied to NOI and cap rate.
- Special assessments act like capital calls. If levied after you close, they can reduce short term cash-on-cash returns.
- Tap fees raise your upfront cash need. The boost to basis helps depreciation, but the timing still affects early cash flow and liquidity.
- Lenders underwrite using NOI. A higher effective tax burden can limit loan proceeds or valuations at refinance or sale.
Who to involve and why
- Qualified intermediary with build-to-suit experience to manage identification, disbursements, and title timing.
- 1031 tax attorney or CPA to confirm how tap fees, levies, and construction costs are treated and to help you avoid boot.
- Real estate attorney to set contract terms for tap fees and special assessments and to add protective language for post-closing charges.
- Title and escrow to confirm vesting and any recorded district liens.
- District and utility managers or engineers to provide current bond, levy, and tap fee information.
- Town of Parker planning and permitting staff, plus a local builder or GC, to confirm plan review and meter timelines.
- Douglas County Assessor and Treasurer for current and projected tax information on the parcel.
Common pitfalls to avoid
- Identifying property without a precise legal description or parcel number.
- Missing the 180 day title vesting requirement while you wait for construction.
- Underestimating metro district mill levies or assuming they will not change.
- Overlooking special assessments that start after closing.
- Paying tap fees outside the exchange when you intended to use exchange proceeds.
- Builder draw schedules that your intermediary will not or cannot fund within the exchange framework.
Next steps
If you want your Parker 1031 new build to perform as planned, front-load the diligence and structure. Lock in identification and vesting details, verify the district’s debt and mill levies, confirm tap fee timing, and model your returns with conservative scenarios. The right intermediary, legal and tax team, and local contacts can keep your exchange on track while you build.
Ready to map your Parker exchange into a new build and protect your returns? Request a Confidential Home Valuation and a planning consult with Unknown Company.
FAQs
What are the 45 day and 180 day 1031 deadlines for a Parker new build?
- You must identify your replacement property within 45 days of transferring the relinquished property, then acquire title within 180 days. Improvements do not have to be complete by day 180, but title must vest properly.
How do metro district mill levies affect a Parker investment property’s NOI?
- Debt service and operations mill levies raise annual property taxes, which lowers NOI. Lower NOI can reduce cash-on-cash returns and may impact valuation because value is tied to NOI and cap rate.
When are tap fees due in Parker and can 1031 funds pay them?
- Tap fees are often due at permit, closing, or meter installation. You can pay them with exchange proceeds when the payments are properly routed through your qualified intermediary or accommodator per your exchange agreement.
What records confirm a Parker property’s metro district debt and assessments?
- Review district annual reports, the service plan, bond disclosures, and Douglas County tax records that show the mill levy breakdown. Ask for written disclosures on special assessments and any planned bond issuances.
Do I need an Exchange Accommodation Titleholder for a Parker build-to-suit 1031?
- Not always. If you can acquire title within 180 days and complete work afterward, you may not need an accommodator structure. If construction must proceed before you can take title, an accommodator can help you stay compliant with exchange rules.
