Master Lease and 1031

[Bernie Huckestein]

Question about Master Lease and 1031 exchange

I have a lead on a property and wondering when the timer starts for the sellers 1031 here is the particulars

90 units needing of significant repair and re-position, property is currently @ 80% occupancy with most current rates significantly under market (units under market are month to month)

Property is in a solid area and with the intended rehab investments will enable the 90% for 90 Days required for eventual agency debt

The owner wants to 1031 his money into other commercial properties which he does not yet have identified...he is thinking a lot less management oversight

So my question --  I've discussed a Master Lease with the seller giving me time to bring the property in the 90 for 90; however, checking to see when his timer starts for 1031 hoping it is when the option is executed?  Doesn't help either of us if the timer starts at the Master Lease date.

Thanks, b

[Lien Vuong]

I cannot speak intimately about the Master Lease portion of this but 1031 identification period start 45 days from the sale date of the original property and 180 days to close on the next property. There are many types of exchanges not just building for building for cash flow but you can also apply the exchange reserve into some capital improvement as well, not just for the acquisition cost. 

I think it would be wise for you to have him speak to an exchange attorney, most of them will give you a free consultation, and figure out the strategy for the next move. As a nice incentive for your seller, you can also help pay for the consultation visit as a considerate gesture to help the process along - if it's not free. The easier you make the transaction, the better your seller's experience will be. Win win!

I am happy to recommend you a 1031 Exchange Attorney who specializes in this field and has guided some of my clients in wealth building strategies.