Best 1031 Options for New REI

4 Replies

Hi All

I'm looking for some advice on an upcoming 1031...I have one rental a property, a condo in NYC, that's currently under contract. We'll likely close in a month or so. I'm planning to do a 1031 because like the idea of deferring taxes, but given that I have limited REI experience I'm concerned about forcing a bad deal to avoid taxes. I'm focused on cash flow rather than appreciation, so investing in NYC doesn't make sense. Curious what folks' thoughts are the on best 1031 options for new investors.

Ideally, I would like to find a small MF (or two) in a strong cash flow market. But given that the clock is ticking (about 75 days), and I don't have a team or infrastructure in place (broker, PM, etc), I'm not sure how likely that is.

I've spoken with a couple folks who broker DSTs, but the returns are low (7% max) and the exit options aren't great. There are a couple MF syndicators who will take 1031 funds (as a TIC alongside the syndication LLC), but their closing has to line up with your time. I like this idea, but not all syndicators are willing to do this.

Partnering would probably be a good idea as well; finding someone with experience who needs additional funding for projects. But once again, with the clock ticking, I'd need to set the wheels in motion soon.

I would appreciate any advice.

Thanks,

Matt

  • Syndications and DSTs may or may not qualify for a condo like-kind exchange, depending on the asset and structure of the exchange.
  • If it were me, a small MF is exactly what I would purchase next, depending on the amount of the proceeds
  • I would also get an agent to find the next deal for you, one that works with investors and can simply bring you properties that meet the 1031 and your criteria. I wouldn't normally recommend this, but it's worth the money in this case.
  • Main advice: don't worry too much about it. If you don't find a property in time, the exchange just fails and you simply pay the taxes. Not ideal but not the end of the world. Don't step over dollars for nickels; you are still getting a return.

@Matt S. I think @Rob Haines gave you a good advise. Also, if you're really determined to post-pone your taxes, go with DST option but chose the one that allows you to sell it in a few years (into yet another 1031 exchange). Another alternative similar to DST is fractional property interest, however the returns will also be similar to DST's.

Last but not least, I don't see you mention having a 1031 PRO guiding you through the process. So in case you need one, @Dave Foster is your guy for that.

Good luck!