Finding a replacement for my 1031 exchange

Member since 2017 · 143 posts · 76 votes

I will have around $1 million after the sale of a property. There are no decent deals at moment. I need suggestions, or outside the box ideas? Industrial space seems in high demand when times are bad but they are inflated prices. Multifamily is dismal.

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Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

@Zachary Bellinghausen, Every market is going to be a little different, just like every sector. If you're fixed on FL, then the first thing I would do is buy time if possible. Extend the sale of your old property if possible. And remember that if you're doing a 1031 exchange, you have an additional 45 days after the close of your sale to identify your potential replacements. I know that doesn't seem like a lot of time. But it's amazing how quickly a drop by the fed can impact your proformas. And it's equally surprising how seller sentiment can change on a dime if the dom is starting to creep up on them. Time may not seem like it's on your side. But it really is if you think of it that way.

If you don't find a replacement property you like, you could also look into passive investment opportunities like @Peter Fisher said. There are a few syndications out there, such as DSTs, that qualify for 1031 treatment and allow you to defer all of the tax and still provide passive income. The most important thing with these is that Investors can 1031 into these when the market isn't attractive and 1031 back into real estate once the DST expires and is sold.

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James Derry
Member since 2024 · 49 posts · 23 votes
1y
Where are you looking?
1 Reply
Ronald RohdePro Member
Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
1y
I don't think its fair to paint entire massive CRE asset classes with the same brush. You can find a singular good deal in both classes. Just set what you think is a good deal and start firing off LOIs.
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Bernard ReiszPro Member
CPA delivering RE Tax Tools: 1031 Exchange, SDIRA, 401(k), Cost Seg · New York City, NY · Member since 2017 · 581 posts · 563 votes
1y
@Zachary Bellinghausen This is all too common. Very common for exchangers to struggle to find replacement property. Depending on the amount of taxes being deferred through the exchange, there may be merit to relaxing your underwriting guidelines somewhat.
While it seems safe to assume you're not interested in getting into an "institutional" DST or NNN asset, there are other sponsor types that accept exchange funds on terms that may be more attractive to you. As we want clients' exchanges to be successful, we're always making intros to help exchangers expand their "target bank."
[email protected]
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Zachary Bellinghausen
OP
Member since 2017 · 143 posts · 76 votes
1y
@James Derry
Im looking in Florida
0 Reply
Zachary Bellinghausen
OP
Member since 2017 · 143 posts · 76 votes
1y
@Bernard Reisz
What were the "other sponsor types" you were referring to?
0 Reply
- Bernard ReiszPro Member
  CPA delivering RE Tax Tools: 1031 Exchange, SDIRA, 401(k), Cost Seg · New York City, NY · Member since 2017 · 581 posts · 563 votes
  1y
  Quote from @Zachary Bellinghausen:
  
  @Bernard Reisz
  What were the "other sponsor types" you were referring to?
  
  Bit of a hybrid between "institutional" and standard syndicator. Institutional DSTs have many benefits, but the investor is typically accepting a lower cap rate and eating lots of costs (whether they're visible or not). This is a result of a combination of factors (regulatory, selling process, size, etc.). There are some relatively large capital raisers that have extensive experience with 1031 investors that are big enough to have solid deal flow and are not as constrained as institutional providers. These providers are typically using TIC structures for their 1031 exchange investors. (Much to be said about DST vs TIC from a 1031 exchange compliance perspective...)
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Raymond J. RodriguesBusiness Member
Lender · Miami, FL · Member since 2017 · 1k+ posts · 797 votes
1y
@Zachary Bellinghausen if you're interested in short term rentals that are performing well, even in this market, with strong ROI, reach out to @Josh Green! He is in the Florida market.
[email protected]619-456-8311
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
1y
@Zachary Bellinghausen, Every market is going to be a little different, just like every sector. If you're fixed on FL, then the first thing I would do is buy time if possible. Extend the sale of your old property if possible. And remember that if you're doing a 1031 exchange, you have an additional 45 days after the close of your sale to identify your potential replacements. I know that doesn't seem like a lot of time. But it's amazing how quickly a drop by the fed can impact your proformas. And it's equally surprising how seller sentiment can change on a dime if the dom is starting to creep up on them. Time may not seem like it's on your side. But it really is if you think of it that way.

If you don't find a replacement property you like, you could also look into passive investment opportunities like @Peter Fisher said. There are a few syndications out there, such as DSTs, that qualify for 1031 treatment and allow you to defer all of the tax and still provide passive income. The most important thing with these is that Investors can 1031 into these when the market isn't attractive and 1031 back into real estate once the DST expires and is sold.

The 1031 Investor5137 Reviews
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John M.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 796 votes
1y
You are correct that a lot of things are inflated. It's a tough time to find a deal out there that makes sense. Florida scares me a bit as Insurance costs are going through the roof. DST's are an easy way out but don't pay high yields and your money is locked up. You can also pay the tax and invest in private equity (alternative investments like private credit and mortgage notes) that have double the yields of a DST and share the same risk. Traditional real estate flipping syndications can pay a bit more, but not guaranteed, your money is locked up, and you have the risk of capital calls. It really just depends on what kind of investor you are.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
1y
Zachary it never ceases to amaze me how everyone post all these strategies but nobody asks about YOUR LIFE and investment goals.
You can be in the high growing wealth phase, medium growth, and wealth preservation phases for some or all of your portfolio. I call it active to passive wealth conversion.
To some investors a 5% return is amazing and to other they want 12%. Along with that can come more risk and uncertainty with the investment.
I typically know within 60 seconds on the phone if they are a fit for NNN or not. I tell them my thoughts if they are not a fit what they might want to look into.
Good luck
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Melissa JusticeBusiness Member
Rental Property Investor · Phoenix, AZ · Member since 2024 · 518 posts · 1k+ votes
1y
@Zachary Bellinghausen,

Hey! Congrats on the upcoming sale and having that kind of capital ready to deploy. You’re right - it’s a weird time in the market. Cap rates are compressed in a lot of traditional asset classes, and multifamily underwriting is tight in most metros. That said, there are still some smart, strategic moves you can make, especially if you’re open to non-traditional angles.

Here are a few ideas to consider while you're waiting for the right long-term opportunity:

Outside-the-Box Strategies for $1M in This Market
1. Build-to-Rent in Cash-Flow Markets
If you're patient and want stable cash flow with lower risk, consider building or buying new construction rentals in landlord-friendly markets like Citrus Springs, FL, Birmingham, AL, or Indianapolis, IN. You can work with a builder or turnkey operator to pick up 3–5 homes for $200K–$300K each - all rent-ready, low maintenance, and professionally managed. You’d hit solid 6–8% net yields with appreciation upside.

2. Triple Net (NNN) Commercial Properties
If you want ultra-passive income, look into smaller NNN deals - dollar stores, small office/retail with long-term leases, or even single-tenant medical. These aren’t as exciting, but you can lock in 5–7% cap rates in strong markets with zero management responsibilities. Just make sure the tenant and location are rock solid.

3. Buy an Undervalued Business with Real Estate
Think RV parks, laundromats, self-storage, or small-town car washes where you’re buying both the business and the dirt. You can often find tired operators and generate double-digit returns with some operational improvements. These are niche plays, but with $1M+ you have real leverage to pick up a cash cow.

4. Fractional Investment in Industrial or Flex Space via Syndications or REIT Alternatives
You’re right - direct buys in industrial are inflated. But if you want exposure to that sector, consider private syndications or crowdfunded platforms that specialize in industrial/flex space with shorter hold periods. You get the income without the inflated sticker shock.

5. Short-Term Rental Clusters
Instead of a single STR in a saturated market, buy 2–3 properties in a mid-tier vacation or drive-to market (think Smoky Mountains, Gulf Coast, Lake of the Ozarks). Operate them as a mini portfolio with smart automation, and you can easily target 10–15% cash-on-cash returns, especially with no mortgage.

What Not to Do Right Now:
Rush into overpriced multifamily just because you have the capital. Many sellers are still clinging to 2022 valuations and debt terms don’t support it.

Sit on the sidelines indefinitely. Even if you’re not going “all in” right away, there are safer, smart places to park money with yield while you wait for more distress or clarity in the market.

You’re in a great position - you just need to pivot from “traditional” to creative + fundamentals-driven thinking. Smart money is moving money!

Best of luck,

Melissa

[email protected]313-221-8718
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Ian IppolitoBusiness Member
Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
1y
Quote from @Zachary Bellinghausen:

I will have around $1 million after the sale of a property. There are no decent deals at moment. I need suggestions, or outside the box ideas? Industrial space seems in high demand when times are bad but they are inflated prices. Multifamily is dismal.

There are literally hundreds of exchange properties to choose from in DST funds (like 1031Crowdfunding.com). Retail, industrial as you mentioned, self storage, triple net lease, etc.

Also, I know of an RIA that will rebate the usual sales commission and broker-dealer fees that are only charged (and end up saving about 5.25% over the typical deal that charges them). They only offer this when referred by a party they already have a relationship with (i.e. not on a public website). So if you're interested, private message me and I can send you more details.
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Allan C.
Rental Property Investor · Member since 2018 · 826 posts · 810 votes
1y
What was your motivation to sell in the first place? Perhaps think about the exchange where you are selling your downleg at an inflated valuation, so that offsets the purchase valuation. I'm guessing you are in an unplanned situation where you have to sell? Otherwise, I'd like to understand if you weren't expecting to be in this spot.
0 Reply
Zachary Bellinghausen
OP
Member since 2017 · 143 posts · 76 votes
1y
@Allan C.Buyers Offer was a good one, that is why I am selling.
0 Reply
Zachary Bellinghausen
OP
Member since 2017 · 143 posts · 76 votes
1y
@Melissa Justice
Thanks for the in-depth analysis!
1 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
1y
Quote from @Zachary Bellinghausen:

I will have around $1 million after the sale of a property. There are no decent deals at moment. I need suggestions, or outside the box ideas? Industrial space seems in high demand when times are bad but they are inflated prices. Multifamily is dismal.
Finding a property to buy THAT MAKES SENSE is a dilemma we all can relate to in this market!
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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
1y
I find 1031 exchanges incredibly tough to pull off effectively. People love to talk about them like it is easy but they are not. What is the point in selling in the first place if you can't find a better investment.
2 Reply
Zachary Bellinghausen
OP
Member since 2017 · 143 posts · 76 votes
1y

@Joel Owens Thanks Joel, Have time to talk one day this week?
0 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
1y
Have Thursday 3 Eastern time. You can inbox me here or reach out on my website and fill out the contact form.
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John M.
Investor · Fairfax, VA · Member since 2015 · 1k+ posts · 796 votes
1y
@Ned Carey

Agreed. 1031's are a royal pain in the butt. The only easy way out is a DST, even then your going to have to do another 1031 when the DST sells. Earning 5% on a DST is a bit small as well. @Zachary Bellinghausen send me a note and I will show you a different path.
2 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
1y
DST's have an EVENT HORIZON mandate where they have to dispose of a property by a certain timeline.
So one DST overpaid and I am offering 1.5 million dollars less with cash purchase to buy it from them.
That is why I do not like properties with debt on them or these DST's where they have to time the exit. Some of my clients bought at 5.25 cap rates when debt was at 3.5 and they did fixed for 10 years with 30 year amortizations and had a healthy amount down to start. So by the time the loan comes due they can just pay off the tiny remaining balance and do not have to sell.
Debt can be good in certain situations if you use it properly but if abused debt with commercial properties you could lose half the investment having to sell in a non optimal time in the market.
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Josh L.
USA · Member since 2023 · 145 posts · 84 votes
1y
good convo - as oft said don't let the tax tail wag the investment dog.
2 Reply
Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
1y
OP. I did a quick search on Loopnet. Came up with 232 properties $900,000 to $1,500,000; versus your $1mm figure. All in Florida. All with listings from 3 years ago to older than 12 months ago. "They want to sell, and the market has told them, their price is wrong.".
Personally, I would buy the land in Hudson, Florida; fits our market target and business model. Don't care about insurance, hurricanes, flooding or property taxes. Plus, it's close to Tampa. Define what your business model or parameters and do a quick filter.
I have done a reverse 1031 exchange. Personally, I would pay the taxes. I don't like doing deals on a timeline, you make bad decisions, and you lose the bargaining power making your purchase deal. If your business model is good, you will make back far more than the time value of the Taxes.
Look for the Nastiest property you can find, that has been on the market the longest; and develop a business model around it. Make a 3-day offer, then go to the next one. Buy at your price. These properties above are in a Buyers' Market scenario.
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Todd AndersonPro Member
Real Estate Agent · Cape Coral, FL · Member since 2023 · 392 posts · 175 votes
1y
@Zachary Bellinghausen
I totally understand the pressure of finding a replacement property for a 103. You want to find a deal better that the one you sold.
I would recommend looking to new construction in Florida. There is all kinds of talk out there about some areas of Florida being over built. This is not every market.
In many areas around Florida the Build to Rent market is still strong. Investors are able to get good incentives from the builders and they are also able to find good renters because it is new. As a buyer you would be able to own the property for the best years of the properties life, when it is new.
I work with builders that are building all sizes of property for all price ranges. we are able to find investors off market for their builds.
Connect with more questions or more info.
[email protected]651-492-5652
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Parker Schultz
Lender · San Diego · Member since 2025 · 39 posts · 6 votes
1y
Reverse exchanges can sound complicated, but I’ve come to really like them — probably because they were one of the first things I learned in real estate.

I think a lot of investors get stuck trying to make the numbers perfect today, when the bigger picture is what really matters. Yeah, you might pay a little in fees upfront. But the ability to roll your capital gains into a better property — one with more upside, stronger cash flow, or better long-term stability — is way more important.

Even if it costs a little now, it’s almost always way cheaper than paying the full tax bill.

At the end of the day, I think it just comes down to knowing what your goals are. If you're trying to grow and hold for the long term, a reverse 1031 can be a really useful tool to make that happen.
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Parker Schultz
Lender · San Diego · Member since 2025 · 39 posts · 6 votes
1y
Quote from @Zachary Bellinghausen:

I will have around $1 million after the sale of a property. There are no decent deals at moment. I need suggestions, or outside the box ideas? Industrial space seems in high demand when times are bad but they are inflated prices. Multifamily is dismal.

One of my best clients is developer and seller of triple net properties. I can connect you with him to see if his inventory would be good fit for you.
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