Combining Seller Financing and a 1031 Exchange
I am seeking to exit from real estate by way of seller financing. The properties were originally retail and office, but most recently are apartments, so I assume there is recapture of depreciation (not sure if that is section 1245 or 1250). In any case, alot in taxes would be owed. And what I am seeking to accomplish is to get out of real estate. And I had the following questions:
1) If you seller finance and the buyer defaults and they don't cooperate with you, are you still going to be able to complete the exchange process.
2) To know the buyer is serious I will want a serious down payment. But I don't even want to receive all of that at once. Can I set time frame(s) during which the money is received (100K a year, for example) by having a exchange accomodator hold the money,etc. Or would that violate the 180 day rule?
3) Can I stagger the balloon payments? Such as having a ballon every year for 100K until it is exhausted.
4) If, when I am entitled to receive the funds, if I instead want to 1031 the balloon into another property, can I do that?
5) What I am trying to do is to gradually receive the funds, but I'm not sure how to accomplish that.
6) I have heard a suggestion to do multiple 1031s and receive a certain amount of cash year, but that would be alot of work since I would have to buy 90% of my current assets, then the next year 80% of my current assets, etc.
7) I don't really trust the TIC and/or DST (Delaware Statutory Trust) type properties, so I tend to think of this as the most likely resolution.
8) Since some of these properties are triplexes, some would be classified as residential. Although I could combine them so they are all commercial. In terms of prepayment penalties I have heard some commercial brokerages will do a penalty like 5% 1st year, 4% 2nd year, 3% the 3rd year, 2% the 4th year and 1% the 5th year. Will that complicate the transaction?
Thanks. Any suggestion appreciated.