Flip or Flop Duplex?

[Melanie Chambers]

I am a newbie and would love advice on this deal. I am looking to purchase a Quadraplex in Albany, Georgia.

Asking price $249k and all units are rented with the total rent at 2320. The plan is to increase rent from 580 pp to 650 with tenants paying all city utilities. Annual property tax: $3100. Water heater and furnace are both less than 10 years old. Air conditioner is over 10 and for expense planning purposes we can expect to replace that within 5 years. 

The units are in decent shape, but nothing fancy. They could certainly use a remodel to look nicer, but as is they are functional and basic. 

This is quoted “Seller is looking to possibly to a 1031 tax free exchange which any buyer would need to participate in at no expense to the buyer.” 
I have researched this and wanted some insight in that as well. 

Thanks in advance with your thoughts on this deal!

[Dave Foster]

@Melanie Chambers, A 1031 exchange can be a trade like @Ronald Allen Barney is suggesting.  But I think it's much more likely that the seller is doing a 1031 exchange simply by them selves.  They are selling this investment property and with the services of a qualified intermediary they will find and purchase replacement investment property.  By following the process they will indefinitely defer all tax on the gain from the sale.

They have put a cooperation clause in the contract to give you notice that a 1031 is happening.  But there is nothing you need do differently than buy the property as usual. "Participate" just means you will allow the 1031 to be named on the settlement statement.  and youll let the qualified intermediary have some verbiage on it as well that doesn't affect you at all.