Assessment of 1031 potential

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I am interested in selling 5 single family rentals and purchasing one multi family property. After reading through a variety of resources on similar scenarios I am left with questions about how to construct a viable strategy and where to find an experienced agent who can execute the this kind of transaction. Any guidance would be appreciated. 

Hi @Eric Noble

You can absolutely sell five relinquished properties and consolidate them into one larger replacement property.  It can get tricky as you add more properties to the equation.  

There are a couple of ways to set this up.  I would start with one (1) 1031 Exchange.  The 45/180 calendar day deadlines start running with the closing of the first relinquished property.  You can always drop the last few into a separate 1031 Exchange if they seem like they are going to close much later so that you have a new 45/180 calendar day period.  They can still acquire the same replacement property if the deadlines all work out as needed.  It is all about the timing. 

It is also possible to combined two (2) different 1031 Exchange strategies if the timing does not work out as you had hoped, such as starting with a regular Forward 1031 Exchange and then go into a Reverse 1031 Exchange.  This way if you are able to sell some of the relinquished properties (but not all) early and have to close on the replacement property before the other relinquished properties sell/close, you can close on the replacement property by starting a brand new Reverse 1031 Exchange so that you can sell the other relinquished properties later. 

@Eric Noble There's really three main paths to getting where you want to go.  Each has its costs/advantages/drawbacks.

1. Try to sell the 5 as closely together as possible so there's enough overlap in the 45/180 day calendars that you can then purchase your larger replacement.  If you can't get one or two closed within the time then treat them as separate exchanges and use the 3 you could bunch to purchase a larger building.    This may turn one consolidation exchange into two separate purchases that you can later combine if you want.

2. Sell the properties as a portfolio.  I used to see a lot of "haircut" on the sales price of portfolios.  But the appetite of growing investors is insatiable.. And I've actually seen some portfolios selling at close to single property price per for all.  Your    QI can then treat that as just one exchange with one set of timelines and one exchange fee.  So you can save some money and simplify things.

3. If you have found the perfect replacement at any point in time do a reverse exchange.  This is the most expensive option transactionally.  Your QI will have to form a holding entity that takes title to the new property and holds it for up to 180 days while you complete the sale of your old properties.

Any of these can be used or combined to create a consolidation exchange scenario like you're proposing.