Selling 96 Unit Complex; Need Help With 1031

7 Replies

Hello I just had a question for the Bigger Pockets community. I know someone personally who is selling a 96 unit apartment complex for quite a bit of money. But he doesn't understand the tax code and I don't either so I wanted to see if you all would be willing to help me out. He wants to use the money to pay off all of the real estate loans that he has and then use the remainder to build another apartment complex with 60 units and also buy a condo in Miami to AirBNB it and make some profit off of it. But I believe that he will still have to pay taxes on the amount that the property is sold unless he fills out a 1031, but I can't seem to wrap my head around the rules. If anyone could help us out that would be amazing. 

After selling his 96 unit, he will have a short and finite amount of time to identify and buy the new properties assuming he's going with the 1031 option. You are correct in that if he's not doing a 1031x, he still needs to pay capital gain on the profit.

@Jose Sanchez

This website

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I am not compensated for this in anyway. Just passing along a great resource that helped me greatly.

@Jose Sanchez , The 1031 exchange could benefit him.  But it also sounds like he's wanting to pursue a strategy (paying off existing loans) that will limit the 1031 benefit.  Doesn't mean he can't do both but there's some very strategic things he needs to work through with his accountant and QI.  It's the tax code - It's supposed to give you a headache:)

Need to cover boot?  There are options out there.

@Vi K. Thank you for the reply. He plans on building new apartments after he sells these. Ff he's going to build the apartments from ground up, does that also qualify in the 1031 option?

@Bill B. I will definitely check it out. Thank you.

@Jose Sanchez , regardless of a construction 1031x or a regular 1031x, he has a finite amount of time to do it. If he decided to do the new build, he has to finish within the timeframe given. 

For example: Let's say the time frame is 180 days. He has that amount of time to spend all the money in the 1031x account on building the complete structure. If by the deadline, and he only finished parts of the building, whatever leftover will not count toward the standing structure.

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