Best book about doing a 1031 exchange?

5 Replies

I'm looking to do my first 1031 exchange for my duplex in San Diego, CA and buying a property or properties in Panama City Beach, FL. Since my top unit in the duplex was rented the entire time I owned the duplex I will have to pay capital gains tax when I sell, so I choosing to step into the area and figure out how this 1031 works. It is daunting. I will likely sell for around $900,000 with a mortgage around $640,000. So I will have to find a good place, or places, in a much cheaper area of Panama City Beach to try and exchange up.

Can I buy commercial properties if I'm selling residential?

I'm looking for good book recommendations, podcasts, webinars, etc that can best educate me on how to execute the best 1031 possible. 

What were some good lessons learned from those that have done several 1031 exchanges? 

@Brad Penley you will want to speak with a CPA and a 1031x provider. 1031x providers are cheap, their fee is not high. The only challenge with a 1031x is the deadline to identify a replacement property, and in your case, do you qualify. Good luck!

@Brad Penley It is entirely possible to exchange a residential property for a commercial property with a 1031. Like-kind refers more to the value of the property or properties that you are exchanging than their type.  Any kind of real estate held for investment can be sold and replaced  any other type of real estate also intended to be held for investment.

It sounds like your first thought is to sell the one highly appreciated asset and exchange that for several cheaper assets in a different location where you can get better cash flow.  This is a perfect 1031 scenario.  We'd call this a "diversification" exchange.  Some things you want to watch out for  - be aggressive with your search.  You only have 45 days after your sale to provide a final list of potential replacement properties.  After this you get another 135 to close but that 45 day window for free shopping closes fast.  We encourage people to get their replacement properties under contract as quickly as possible (even before the sale closes is fine).

There are several specific requirements you'll want to know and be ready to address as you move through the exchange process.  Your QI should be your guide through this.  

You're probably going to have to carry some debt since you'll need to purchase about $900K in real estate using $260K ish of proceeds.  But you can allocate those proceeds in any way you want.

One other thing - if you lived in part of that duplex it may be possible to take a portion of that sale out tax free.  Having a MF and living in part of it allows you to get some gain tax free and defer the rest with a 1031.  That can be awesome in the right circumstances.

There's quite a few resources available at the good QI's sites.  But you'll want to vet experience so you're I'll reach out with  a PM to get a few in your hand.

Originally posted by @Dave Foster :

@Brad Penley It is entirely possible to exchange a residential property for a commercial property with a 1031. Like-kind refers more to the value of the property or properties that you are exchanging than their type.  Any kind of real estate held for investment can be sold and replaced  any other type of real estate also intended to be held for investment.

It sounds like your first thought is to sell the one highly appreciated asset and exchange that for several cheaper assets in a different location where you can get better cash flow.  This is a perfect 1031 scenario.  We'd call this a "diversification" exchange.  Some things you want to watch out for  - be aggressive with your search.  You only have 45 days after your sale to provide a final list of potential replacement properties.  After this you get another 135 to close but that 45 day window for free shopping closes fast.  We encourage people to get their replacement properties under contract as quickly as possible (even before the sale closes is fine).

There are several specific requirements you'll want to know and be ready to address as you move through the exchange process.  Your QI should be your guide through this.  

You're probably going to have to carry some debt since you'll need to purchase about $900K in real estate using $260K ish of proceeds.  But you can allocate those proceeds in any way you want.

One other thing - if you lived in part of that duplex it may be possible to take a portion of that sale out tax free.  Having a MF and living in part of it allows you to get some gain tax free and defer the rest with a 1031.  That can be awesome in the right circumstances.

There's quite a few resources available at the good QI's sites.  But you'll want to vet experience so you're I'll reach out with  a PM to get a few in your hand.

 Hey @DaveFoster, great information. Just following up on the 1031 Exchange book recomendations. Are there any you would recommend?