Investor looking to 'retire' - what to exchange INTO after sellin

[Daniel Dietz]

Hello All, 

I am pretty much completely new to the 1031 field, but am asking this to get some ideas for a landlord that is looking to sell of 7 duplexes but is concerned over his potential tax liability. I want to buy all of them :-)

Other than that, I think he is more than willing to sell if there was a way he could defer his taxes and still have a moderate cash flow. They are held in a Revocable Living Trust. I am guessing that the assets would pass on to his heirs after his passing. He is about 70 years old

• I think his numbers look something like this
  • 800K purchase price
  • 1,100K selling price
  • 400K of depreciation taken
  • 400K of current loans

It looks like there would be a tax liability of about 100K in Depreciation Recapture Tax and 45K of Capital Gains Tax. 

1) Is it correct that to avoid ALL taxes, he would need to reinvest ALL of the 1,100K selling price, less any selling costs?

2) If he wanted to pay off the 400K of loans and just reinvest the700K of 'net gain', does that mean he would defer 64% of the taxes due? If so, does that hold true for the the Recapture and the Capital Gain?

As far as WHAT he could invest in - I dont think he wants to own other physical property on his own, even if were something like a "triple net" type of commercial thing. 

What are the most "hands off" options?

•  Do REITs count?
•  What about hold notes on properties, whether it be the ones he just sold or others?
• What about a JV partnerhsip that holds rentals?

Is there any way that him using Seller Financing to delay some of the gains would help either within a 1031, or just in general?

Thanks a lot, this part of real estate is new to me. I go by the motto when buying of 'figure out their pain and help them solve it' :-)

Dan Dietz