Have a Contract on a com. property, is it late for1031 Exchange

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We have a signed contract on a rental office building, closing is scheduled for April 2nd 2018, is it too late to look into 1031 Exchange ?

Are DST properties usually priced 10 - 15% higher than comparable Non 1031 properties ?

We do want hands off commercial investment, but are apprehensive about their inflated management & hidden fees which will eat into the returns.

I understand if one does not want any real estate related related responsibilities, then you cannot control the costs.  Do the DSTs disclose how much they charge or the transactions are non transparent ?

How does one decide which DST to use ? Each one of them have a flashy website

One can invest in the Public REITS, but will not get much diversification from the stocks & bonds & presently have low yields.

I understand the step up in basis for the heirs after we pass away, but at some time in the future(in old age) if we decide to not do 1031 Exchange anymore, I suppose we will have to pay the Cap Gain Taxes, only it will be a much larger sum as all the carried over proceeds will be taxed. 

We are new to this, initially we built the office for ourselves to use, but after retirement is presently rented .


Keep it simple (KISS), pay about 120k in taxes (pay forward) and then invest the net proceeds of S 600k .  

What do you think of  investing into Real Estate Crowdfunding ?

I know not a single question above by any means, but these are the questions we are faced with with no clear answers.

Thanks in advance for your opinion/experience if you have passed thru this route before, 

What would you do.

Our best regards

@Nisha Saxena , You're not too late to do a 1031 at all.  Most of the document preparation is all done after escrow has been opened up.  So in that sense you've got plenty of time - both to set up the 1031 and to continue your due diligence for your replacement properties.

And although it may feel daunting you've done a fantastic job of distilling down the questions.  Holding up the answers against your goals and personal situation will give you the right path.

If you want to go the 1031 route you will not be able to purchase reit in the traditional sense. And most crowdfunding platforms will not work as well. You are selling investment real estate and must take title to investment real estate. This is why the DST, TIC or a stand alone NNN property of your own make sense combined with the 1031.

And while you're absolutely right to look deep at the actual costs and fees both entering and exiting a DST or a TIC project you can find cost effective quality returns that will rival or beat the stock market average - especially if you factor in tax savings and ongoing depreciation.

The age old question on pay the tax now or pay the tax later can best be put into perspective running numbers.  First you're absolutely right it is possible to never pay the tax and let your heirs take advantage of the step up in basis.  We have clients on their 3rd and 4th generation of doing this.  Heirs love it and The givers feel like they are truly passing along value to their heirs.  All it takes between now and then is to either hold the asset or if you sell do another 1031.  If there is a pressing situation that requires you to sell to get the cash in your lifetime then it is doubtful that you will squawk at having to pay tax at that time.

But if your tax is in the $120K range and you get to invest that for a net return including of depreciation benefit for say 8% then after 10 years you will have more than doubled that tax in return and compounded interest.  In other words simply delaying paying the $120k tax for 10 years reaps you a $259K additional profit at 8%.  Deferring even for a bit can still be a powerful thing.

Hi everyone , we have decided to go a different route with the office building sale proceeds .

Thanks for your participation on this thread

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