Is it logistically feasible to do a many-to-one 1031 exchange?

Question

I plan to buy a small apartment building eventually, but I'd need to sell all 3 of my rental properties to do it. My question is:

1) Is that even legally possible? I've read in multiple places of doing a many-to-one exchange, but I must confess that I've never looked this up on a primary source. Legal jargon gives me headaches...

2) Do you see this being logistically possible? I'd have to align all my lease end dates to a single month, list all properties, find an apartments to declare, ask them to wait until you sell all your properties before closing? Selling all properties while the seller waits seems tough. If the seller backs out after you've sold your house seems worse.

Apologies if these are not intelligent questions. I've never done a 1031 exchange before, but recently became very interested in doing a transfer into apartment. I own multiple "alligator" properties, and I'm looking for an exit. Thank you for any and all feedback!

Dave Foster · Answer

Perfectly stated by @Jeff Copeland. @David Park, I always tell my clients to tackle the hardest and longest job first. In this market that is finding your replacement property. Get it under contract before your sales close or even before you put your old properties on the market (in certain places). Generally the larger properties will have a longer due diligence period and this will benefit you as well.

And you can always explore portfolio sales of several of your old properties under one contract. Conventional thinking used to be that a sale of a portfolio would require the seller to take a haircut on the sales price. But in this market, the right portfolio can actually command a premium.

The key is to get as much work done before the 45th day of the sale of your first property.

Jeff Copeland · Answer

A many to one exchange is actually much more feasible in a strong seller's market (like most of us are experiencing right now), because it's generally quicker and easier to sell your relinquished properties.

But a seller's market requires you to move much more quickly than the maximum timelines imposed by the IRS. You can't just sell your relinquished properties, then spend 45 days narrowing down your list, and then start trying to close on them within the remaining 135 days (they'd all be gone by then anyway).

Ideally, you'd be negotiating the purchase of the replacement property while the relinquished properties are under contract (as in before you close on the relinquished properties). Then, if you can close (or at least be under contract and through due diligence) on the replacement property within 45 days after closing on the relinquished properties, your 45 day list never becomes an issue at all - In fact, it becomes a moot point.

@Dave Foster is a great resource for all things 1031 here in BP.

Is it logistically feasible to do a many-to-one 1031 exchange?

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