When is right time for 1031 exchange ?

Question

Hello!

I owned property from 2001 and now . First 10yrs (2001-2011) period was my primary resident and later yrs used in rental property.

My capital gain is around 1 millions and think to switch another property with 1031 exchange. My left of mortgage is less 100k and used deprecation around 110k. In silicon valley, market is still crazy in sellers market and I'm so afraid to find right property in 45 days and closing 180day.

I'm not sure when is right time and switch to property in sellers market or buyers market.

My cash flower is great but I think the property's appreciation is almost reached the high.

I compared my potential capital gain When I sell now and buy new property with 1031 exchange but still not sure what is best for me.

Thank you

Dave Foster · Answer

@Joanne Jang, That's the poison pill of 1031 investing - the best time to sell and start a 1031 is the worst time to complete a 1031 - a sellers market.  The worst time to sell and start a 1031 is the best time to complete a 1031 - a buyers market.

So whether it's a sellers or buyers market the 1031 has the same challenges.

What I recommend to our clients is to not focus on the market.  Focus on the property and your goals.  Does the house you have move you toward your goals - keep it.  Will selling it and buying different real estate move you closer to our goals - then sell and 1031.

As far as the property you're doing some good analysis.

What's it's appreciation potential?  How about capital expense exposure?  Comparative returns on this versus a different class or number of investments.

Stay with that side of the analysis equation and you can focus on things you can see and control.

Joseph Coleman · Answer

@Joanne Jang What is your purpose for selling? i.e. Are you speculating that your local market will perform worse compared to another market or are you looking for greater cash flow (exc.)?

What markets are you looking at?