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1031 Exchanges

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Shane Clark
  • Commercial Real Estate Agent
  • Sacramento, CA
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When in the market cycle is it best to do a 1031 Exchange?

Shane Clark
  • Commercial Real Estate Agent
  • Sacramento, CA
Posted Aug 8 2015, 13:41

Hello,

Almost 2 years ago my company purchased a small 2 bed, 1 bath SFR rental in Tampa for $40,000 cash. Title was vested in a land trust with my LLC as the beneficiary. The property has stabilized and is cash flowing at $325/mo after accounting for all recurring holding costs and maintenance expenses. The property is located near the boundary of the Tampa InVision Revitalization zone. Over the past two years the city has been executing this revitalization plan and the neighborhood is improving. Current Fair Market Value is approximately $72,000. I am thinking about doing a 1031 exchange next spring into a 6-8 unit apartment in Tampa or Jacksonville where I have an established team.

Is this the right time to do the exchange?  Property values are increasing and I can use the appreciated value of my Tampa rental for a larger down payment for a larger multifamily apartment with higher cash flow.  However, in this appreciating market the apartment I want to exchange into will have a higher purchase price.  Should I rather wait to exchange until there is a dip in real estate values? 

Thank you,

Shane 

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