Sell a rental and 1031 exchanging it into a Mobile Home Park

4 Replies

This year we are going to sell a rental we have and 1031 exchange it into a Mobile Home Park.  

As many of you know it's quite a juggle . . . 90 day notes to my tenants, then dust off the property, sell the property (selling will be easy it's a hot market), 45 days to identify three MHPs of interest, and 180 days to close on one of the three MHPs of interest.

It's that 45 days to identify three parks of interest and then having to close on one of the three --  that concerns me. I think it took Brandon about a year to find his deal. I've also herd Jefferson Lilly say something about a year time frame too.  

Would anyone out there have any advice on how to handle the juggling of this timeline? I know there is a way to do a reverse 1031 where you can do some of the steps in reverse, which might make it easier but I think you have to come with a lot of money up front and I don't know how feasible that it for us.

Thanks 

@Dennis Walker , It all depends on the numbers.  A reverse exchange does not change the statutory order off the 1031 of sell first then purchase.

However, the QI forms a holding entity called the Exchange Accommodating Title Holder (EAT) that takes title to your new property and holds it while you sell your old property.  You do have to provide the funds for the purchase - usually a combination of down payment from you and a loan from a portfolio or private lender.

The bad news is there's probably a little bump in financing costs.  And the process itself adds $4-$6K more to a relatively cheap ($750) exchange.

The good news is that it does alleviate some of the angst over 1031 deadlines.  And you do get to double dip appreciation and income during the time you own your old property and control the new one.

identifying a property could be pretty easy as there are a lot on the market right now.  not sure what price point your looking at, and what areas you are looking to invest in.  the reason it takes a little longer when beginning is because there is a limited inventory of parks out there that most would consider investing in.  So it does take longer initially

Since you can sell the sfh quick, dont do it yet. Start looking for the mobile home park now. When you have done your due dilligence on several and just before you get something under contract, go and sell the sfh.

Thanks everyone.  

Dave,  You said 'usually a combination of down payment from you and a loan from a portfolio or private lender' - So If I found some kind of private bridge loan there wouldn't be any problems cashing that lender out on back end when I sold original sfh.  Am I understanding that right?

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here