80 Unit Apartment Purchase & Seller's 1031 Options
Hi BP,
I'm hoping to get some advice from you BP members who are experienced with 1031 Exchanges.
Background:
I just made an offer on an 80 unit apartment building. I will be assuming the existing mortgage on the property, and plan to pay the current owner $4,000,000, above the assumption, to sell to us. (The assumable mortgage is held by different investor than the seller)
I will pay the seller $2,000 payments each month over a 2 year period with a balloon payment at the end of that term. The idea is that this will allow me to stabilize the property in year 1 without draining all monthly cash flow.
Complication:
The owner is interested in doing this, but there is a hitch. He would like to take the $400,000 and use it in a 1031 to purchase a larger property. He's okay with waiting until the end of the two-year term to receive the balloon, but not sure how that will affect his ability to use a 1031 Exchange.
Questions:
- If he accepts the monthly payments, will the 1031 clock begin at closing?
- If so, is there any way for us to take title/ownership and still allow the seller to defer the 1031 clock until the balloon payment is received?
- If not, what other options would you suggest?
Thanks, in advance, for your help.
Todd
