1031 exchange

7 Replies

so I've been stepping up my game. After many many years of duplexes. Finally took the leap from larger families and stay. Couple weeks ago was closed on 48 unit in Columbus Ohio.  and just before that a 44. In the Carolinas.  So I think it's time to start to liquidate some of the duplexes.. Does anybody know the pitfalls of a 1031 exchange. In two large multiple family. Just a little concerned with finding a deal within the 45 day restriction.. Thank you 

Originally posted by @Bob Shultz :

so I've been stepping up my game. After many many years of duplexes. Finally took the leap from larger families and stay. Couple weeks ago was closed on 48 unit in Columbus Ohio.  and just before that a 44. In the Carolinas.  So I think it's time to start to liquidate some of the duplexes.. Does anybody know the pitfalls of a 1031 exchange. In two large multiple family. Just a little concerned with finding a deal within the 45 day restriction.. Thank you 

 Bob, please email me anything you want to liquidate, as I have Buyers lined up waiting for inventory.  Looking for all sizes multi-family or duplex in and around Columbus/Franklin County. In terms of your concerns with 1031, I'd agree there are pitfalls. This BP article from 2013 I found helpful in understanding benefits and risks of an exchange. Good luck, and congrats on what sounds like lots of success! 

Yep it's an issue, particularly when looking for larger multifamily as opposed to SFR's and 1-4 units. You can also do a reverse 1031, where you buy before your sell, but it has extra hoops to jump through, and I think about an extra $2-3k in 1031 costs.

@Bill Exeter  will know better.

Hi Bob,

We'd like to know of any Columbus, Ohio duplexes you want to sell, as we have investors looking for such property now and might be able to help you. We just ran an article on our website too about 1031 exchanges if you want to check it out. You can click through to our company page and the website link there to read it in our blog. Thanks!

@Bob Shultz , The larger the property you are buying typically the longer the due diligence period which can allow you to actually start the purchase before you complete your sale. The important criteria is that you close your sale before you close the purchase.  But you may put your new property under contract at any time before you consummate the sale.

This also brings into play the idea of using contingencies on both sides to give yourself some breathing room.

Most of our clients purchasing larger properties will always attempt to complete as a regular exchange but they will keep a reverse exchange in their back pocket in case they have to close the new property before the old property or properties sell.  

@Wayne Brooks is right, the reverse exchange where the intermediary sets up an exchange accommodating title holder to hold title to the new property is a relatively expensive proposition.  But when dealing with larger properties or needing to sell multiple properties to purchase the larger property, the benefits of a well crafted reverse exchange can greatly outweigh the expense.

The property I want to liquidate is local here in New York  duplex secret propert  nice cash flo wy

The 45 day period will be the most difficult to overcome as you eluded to. There are always delays in selling properties, and sometimes the financing falls through for your buyer.  I was in the middle of a 1031 and right around the time of closing, the out of state buyer disappeared.  He did a last minute vacation to Aruba. My closing was delayed about 10 days.  As a result of this (and among other factors), 2 out of 4 properties on the buying end were disqualified.  A reverse 1031 didn't make enough fiscal sense.

@Dave Foster stated that the reverse 1031 will help alleviate that, giving you 180 days to do the exchange.  The costs, as Dave pointed out, are much higher.

Thanks @Wayne Brooks

@Bob Shultz

The key to a successful 1031 Exchange is to be prepared and work with a trusted advisor.  

Since you are in the market for larger multi-family/commercial properties, we recommend looking for your replacement property even before you begin the Exchange process.  You can even be in contract for both your purchase and your relinquished property at the same time.  The major hurtle for a 1031 Exchange is the timelines, however if prepared, you can easily be prepared and they do not become an issue.  
A Reverse Exchange, as @Wayne Brooks mentioned, is another option as well.  You can close on the property you will acquire prior to selling your relinquished property.  Both options can be seemless if/when using the right Qualified Intermediary.

I hope this helps you.  I am happy to hop on a call or PM if you have additional questions or concerns.  Good Luck!  Sounds like you are in a very good position with your investment real estate career.

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