1031 Exchanges for Multifamily Strategy Question

[Chris Risi]

Hi all,

Im trying to get a feel for how popular 1031 exchanges are for small multifamily. Im sure it all depends on the market, but Im really just curious to see if there are better categories of real estate for 1031 exchanges than others. Like small multifamily under $1M vs a larger multifamily 50+ unit for example. Or are 1031s popular across all property types pretty equally?

Thanks

Chris

[Dave Foster]

@Chris Risi, Interesting question.  I think you answered it in your last statement.  The popularity is not so much the 1031 as it is the tax deferral offered by the 1031 exchange when an investor sells a piece of real estate to move it into something else.

It all starts with the "why" of why am I selling.  If I want to move to a bigger property or more properties, or a different class of properties, or a different geography or market of properties - these are all things that can be done while not having to pay tax on the sale by using a 1031 exchange.

What's popular is the tax deferral and flexibility.  The 1031 is the tool that will let you be that flexible.  So we see them across all types of real estate.

[Alex Olson]

@Chris Risi Most people are 1031 exchanging out of several 100 thousand dollars into larger properties. What we see most common in Kansas City is someone sells a duplex or fourplex for $500,000 or so and is able to buy a $1m to $1.5mm apartment complex. This assumes that they have paid down debt over the last several years and have around $250,000 to $500,000 in equity they need to put to good use. I can show you some other options if you want, just dm me.