1031 exchange into a MHP

5 Replies

Depends on a whole load of things you haven't defined... 

Firstly, based on my 1031 experience, I don't think you can use 1031 $$ to buy into an OZ fund. It's a fund not an asset to be titled the same as your 1031 sale property. Need the experts to confirm.

There is nothing special about a 1031 from a house (assuming it's an investment property) into a MHP that you will own directly other than it's just much more complicated timing as you would be moving from a house market with loads of buyers to a RE niche market, MHPs, with few sellers. Doable but will take lots of research on your part to see if it fits your goals, risk tolerance, and investment horizon. My 1031 tip is that I watch my sell/buy markets closely for about a year to get a good estimate for timing. I always sell first. The day after closing I submit my replacements. The 1031 tricky part is can you find the replacements to meet the deadlines? I personally find it too risky to start the exchange before my sale but this is doable and your QI can clarify this process. In any case, my second 1031 tip is have a plan B for your exchange $$ in case you don't ID or buy the replacement(s) on time. What will a full or partial boot cost you? Do you want to add a mortgage to new property to get the numbers to work? I'm now researching DST as an option for future 1031 exchanges. Have no experience there.

Investing in an OZ is another whole sterling opportunity or can of worms depending where you are at in your life. I own property in an OZ but not sure if I'm going to go down that path when I sell it. I'm at the cranky old lady stage of turning my RE into cash so my financial dummy heirs won't do something stupid after I'm not here to tell them what to do... You look like you're at the young whipper snapper stage. Do your research on OZs and go for it if it fits. No one will look after your $$ better than you. Wish you all the best!!

@Glenna Wood to the "cranky old lady  looking after financially dummy heirs".  I wanna buy you a cup of coffee just to talk.  That was the most awesome response!!!

And you're absolutely right about buying into an Opportunity fund.  Unless @Alison Zywicke can take title to a tenant in common interest to the real estate it does not qualify for the 1031. But Alison can absolutely buy a MHP in an opportunity zone. Depending on the valuations and other considerations she could actually do that without a 1031 exchange using just the capital gain from her sale. But that will limit the opportunity roll that property forward and for the tax deferral down the road.

A good DST or two can be a very valuable back up to save the tax deferral if you can't find a good hard asset replacement.

@Glenna Wood @Alison Zywicke

In addition to the OZ's, and Delaware Statutory Trusts (DSTs) the other lesser known DST, the Deferred Sales Trust can also provide a vehicle for deferring taxes. The upfront legwork is more complex, but you are given the opportunity to invest anyway you want as the trust structure is what defers taxes, not the investments in side of it.

It can be be a valuable back up plan should a 1031 plan fall apart and it provides more investment flexibility than an OZ might.

Give it a google.

Hi @Alison Zywicke . Any update on your plan? I recently heard about a few DST MHP options. You would not have to be a Tenant-in-Common to invest in a DST of course, and you could invest any part of your funds in a DST and still have the flexibility for the remainder of your funds.