1031 Is it possible to do an exchange with 2 deferred & 1 reverse

[Al Skerrett]

2 part question - 

Is it possible to do a 1031 exchange selling 3 properties with 2 deferred & 1 reverse when purchasing a single property? With the time constraints (45 days to identify) I may not have time to sell all 3 prior to the purchase.

I've noticed a large difference in 1031 exchange companies when it comes to the fee ($200-$750) for additional relinquished properties as part of an exchange, I've been focused on just making sure the company has a dual signatory account and would love some input as to why there would be such a large difference in price...

I've been reading topics here for months but haven't seen my specific question so any advice would be appreciated...

Al

[Dave Foster]

@Al Skerrett, I think the way you have to think of this is that you need to do a reverse exchange because the three properties you want to sell as your relinquished properties will not all sell before you have to take title to the replacement property.

What would happen is that we as the intermediary would take title to the new property and hold it.  This could happen before any of your sales happen or after one or two of them happen.  You can even use the proceeds from one or more sales to help purchase the new property.  But you will not take title initially.  Your QI will.  From the moment your QI takes title you have 180 days to complete the sales of all three of your properties.  As each property sells it starts a new exchange.  As soon as each of the three exchanges have started then you can complete each respective 1031 with the purchase of the new property that the QI is holding.

The expensive part of this is going to be the reverse.  for you.  The requirements of Rev proc 2000-37 are all pretty much demanded by the IRS and that means several levels of document protection for you.

[Al Skerrett]

Thats great information! @Dave Foster Thank you... I've given it more thought and will more than likely complete my sales before making my purchase but it's good to know that option is available... I am a little unsure about having to do 3 separate exchanges though when purchasing a single property. I will look for posts regarding this to boost my knowledge. Thanks again for the info...

[Alex Olson]

Originally posted by @Al Skerrett:

Thats great information! @Dave Foster Thank you... I've given it more thought and will more than likely complete my sales before making my purchase but it's good to know that option is available... I am a little unsure about having to do 3 separate exchanges though when purchasing a single property. I will look for posts regarding this to boost my knowledge. Thanks again for the info...

 I recommend taking an as simple as possible approach to it or you will either mess it up or stress too much. Find the easiest way possible for you to get it figured out with your benefits you need. 1031 exchanges are common but make sure you have a great QI like Dave and they can steer you through it. It is worth the money. 

[Toni Baca]

Hi @Al Skerrett, 

The reason you need to do 3 separate exchanges for each individual property you are selling is because each relinquished property is its own 1031 exchange. You need to enter a 1031 exchange agreement, and have your QI set up a 1031 exchange account to hold the proceeds of each property sold. This is regardless of how many you are purchasing. Typically exchange company's charge an extra fee for additional replacement properties for example if selling one and purchasing 2+ properties. (The additional replacement cost may vary) However there is always a fee for each relinquished property sold. 

I also agree with Alex, a good QI is worth the fees. I have heard horror stories, and you want to ensure your taxes are deferred correctly.

Did that answer your question?

[Al Skerrett]

Thank you Toni, That continues to add clarity for sure. I guess I was a little confused early on as far as fees associated with the relinquished properties. I’ve gotten quotes significantly different on adding additional properties so I was unsure why that would be the case but seems it may just require a little more homework to understand the differences from one company vs another. 

[Toni Baca]

Hi @Al Skerrett,

Oh good I'm glad it brought some clarity, and that definitely makes sense why you would be confused. I always advise people when shopping for a QI get someone who will get on the phone with you. If they are holding your proceeds, they should be able to pick up the phone, answer your questions, and find the best scenario for your situation. Find out there experience, and if they are able to answer all your questions. Overall I would say the industry prices are similar across the board, although one company may charge a little less or more. Also some companies you can even make a deal if you are selling more than one, but there will always be a fee for each relinquished. 

Hope that helps!

[Al Skerrett]

Originally posted by @Toni Baca:

Hi @Al Skerrett,

Oh good I'm glad it brought some clarity, and that definitely makes sense why you would be confused. I always advise people when shopping for a QI get someone who will get on the phone with you. If they are holding your proceeds, they should be able to pick up the phone, answer your questions, and find the best scenario for your situation. Find out there experience, and if they are able to answer all your questions. Overall I would say the industry prices are similar across the board, although one company may charge a little less or more. Also some companies you can even make a deal if you are selling more than one, but there will always be a fee for each relinquished. 

Hope that helps!

[Al Skerrett]

Thats great advise Toni, thank you!