Selling & Buying with 1031

[Sam Liu]

I completed a 1031 exchange two years ago, but found the strict time limits made it difficult to find a good deal. It often feels like either selling high and buying high, or selling low and buying low. I sold one property just before interest rates went up, which worked out well for the sale price. However, I had to pay a premium for the exchange property because the market was so hot at the time. Now, property values have dropped—almost to the point where the capital gain tax I avoided through the exchange is offset by the decreased value.

Has anyone found an effective 1031 exchange strategy that allows you to take advantage of the tax benefits while still buying the replacement property at a good price?"

[Rick Albert]

I have had two clients now do a REVERSE 1031 Exchange. This is when you buy first, then sell. The 180 days still applies, so after you buy, you have 6 months to get your property sold. Because it is a more complicated process, the exchange fees are higher (around $7K versus $1200) but in the big scheme of things it could be to your benefit.

When you speak with the exchange accommodators, ask them for referrals on lenders that can facilitate this, as not all lenders can make this happen.