1031 exchange - commercial

4 Replies

We are in the process of selling commercial property that we own in NJ. Unfortunately, I think we may have made a mistake in selling it. But it's too late now. We are going to do a 1031 exchange. We need advice on the best way to invest the money. It doesn't have to be in our current area (FL). I know we have limited time once the property closes and feeling very anxious about making the decision on what to do with the funds. We have owned a couple of rentals in the past and it has not been the best experience. We are looking to start fresh and hopefully build a portfolio of rentals as passive income. Any advice on which direction to go with the 1031 exchange would be appreciated! 

@J Chouinard Howdy Neighbor!  No good time to sell real estate - no bad time to sell real estate!  

You've got so any options and you'll hear them all here.  One thing I'd encourage you is to stay in FL or one of the other states with no income tax.  It's not nearly such an advantage to invest in a tax free state if you don't live in one.  But you reside here and investing here also adds 5-10% to your net every year.  And if you're going to the trouble to defer capital gains tax why not eliminate state income tax on the resulting income also.

If you're on a deadline, I would work with your attorney/CPA now to be sure they can quickly complete due diligence once you do locate a property.

What are your factors for "passive" what is the size of target?

What type of commercial did you own? How much proceeds from your 1031 exchange? Will you add more money for the down payment for the right property? When you say WE is that you and your significant other, a partnership, a syndicate, etc.? Does the group have the same vision for the 1031 proceeds?

Commercial real estate can be some of the most passive out there that exists. You must have owned something more mom and pop or an older type building to not want to hold the asset.

I have lot's of 1031 exchange clients that buy commercial properties specifically my area of specialty is commercial retail properties. The days do go fast. You need to have a plan and decide on what you want to do and then seek that out in a focused manner.

I usually talk to people on the phone about 1031's and their goals. There are pluses and minuses to all types of investing so nothing is perfect.

If you want to be totally passive then a NNN ground lease or NNN land and building for STNL those you do nothing but get the check. From there a little more active but high quality is a 2 to 4 top type property such as Aspen Dental, T-Mobile, and Starbucks all with 10 year lease and rental increases of 10% every 5 years etc. Those tend to cost about 3 to 5 million in most quality areas of states. Yield goes up for dealing with regional to mom and pop tenants but becomes less passive and more involved.