All Forum Posts by: Robert Hetsler

Thank you both for the feedback as I will look into the podcast as well

I hope someone can help offer some financing options for my situation. In short, I own 8 separate self-storage facilities, most of whom have a first mortgage on them but all of the ones with first positions have at least 60-70% equity. Between all of these facilities, I have about 5 million in equity but they are mostly held in separate LLC/Corp but I am 100% owner in all of them. Additionally, I have 6 condos/townhouses, a self service Carwash, some warehouse space, and residential /commercial property free and clear. The issue is pulling any equity out of these properties has proven to be impossible because of being self employed with the new banking regulations. Probably another million in equity there but my goal is to secure a $500,000 loan or line of credit which will allow me to do some expansions and secure some additional properties. I am happy to put any of the property up as collateral so anyone who has any solutions or suggestions, I welcome them.

if all three properties are investment properties, you can engage in one but it would be wiser to wait and do the cash out refinance post exchange because you will need it for the exchange to meet the requirement of purchasing something of equal or greater value.  Alternatively, you can just secure a loan at the time of purchasing the replacement property as well.  Just try to avoid duplication of closing costs twice in such a short period of time.  Reason being is that, in order to secure the full benefit of the 1031 exchange, you will need to purchase something of equal or greater value, less reasonable and necessary closing costs, NOT to include a mortgage.  That essentially requires that your replacement property have a mortgage of equal or greater value or have funds from a third party source or your own cash to bring to the closing table to reduce the mortgage requirement partially or fully. 

Either way, speak to a Qualified Intermediary first to ensure you avoid unnecessary costs by structuring it the most advantageous way and avoid unnecessary and duplicative closing costs.  You have already taken the first step and have been proactive in that you have sought advise prior to moving forward so good for you as I do not see that as often as I would like to. 

As for qualified intermediaries, I am one and am happy to assist but @Dave Foster and @Bill Exeter are both are just as qualified and I would trust with my money.  Whoever you hire, just ask for references, insurance and experience so that you feel comfortable.  Licenses of some sort is a plus because an independent third party can verify whether there are any complaints for anything so a real estate license, a CPA license, Attorney license, or the Federation of Exchange Accommodators designation and many more.  Those are just some examples.  Good luck and, again, I am happy to help but make sure you interview at least 2 or 3 people prior to making a decision,

First, let me say that if you resided in your home above 2 out of the last 5 years, assuming it was not purchased from 1031 Proceeds as the rules are a little different, I do not believe you need a 1031 and since it was your primary residence at the time of sale and you are intending to buy/build a primary residence, you would not qualify for the exchange anyway.  It is well settled that 1031 Exchanges are strictly for investment property held for investment.  Check out section 121 of the IRS code as you might be exempt form 250K or 500K of that sale, depending on the facts and if you are married.

Of course, if the facts are a little different than you  described above and did involve investment property, I would be able to assist.  This also assumes there is no need to engage in an "Improvement Exchange" because of the rehabilitation costs. It would not be necessary if you are purchasing up more than enough to cover the 30,000 in rehab costs. Of course, I can just as well.

Alternatively, @Dave Foster and @Bill Exeter are both equally as qualified and reputable.  I am not sure of their fee structure but I charge $775 for everything you described above, assuming it was investment property and otherwise qualified, so they could be less or more but the best thing is to deal with someone reputable by checking insurance, experience and references all of which I know the two above can provide easily provide.   You can email me directly and I am happy to provide a ton of references . There is enough business for all three of us so I think we all speak highly of the other one because I know I do feel they are both more than qualified and I would use either of them and trust them with my money if I was the one engaging in an exchange.  Although @Dave Foster is a little funnier (in a very positive way!)  Just a joke!  Good Luck.

I have been doing this for years for clients and I have seen people that are more seasoned learn to plan for contingencies so they have a TIC of a DST or something like that, which is typically a fail safe lined up in order to avoid that very issue.

You are correct that it is a potential pitfall but being proactive and ensuring you have covered all your basis, will reduce that risk significantly. Essentially, there is always something I find for clients as a fail safe all the time and they are out there. So, while I do believe there is risk in everything you do in life, like everything else in life, this can be greatly reduced. Truthfully, it can be very close to zero risk if you find a TIC or DST play ahead of time as a solid failsafe will prevent that explosion almost every time. I hope this helps!

I am a native of the area and can tell you that Jacksonville is a very large city and on all sides of town there are both good and not so good places to invest but the westside is not notorious for the best place to live. Having said that, a large part of your decision should be based on what you can rent it for and the average length of time it takes to rent a home in the area. Overall, and generally speaking, there are several other sections of town that are more desirable but I would certainly consider the ROI as well because if the price is right, it can certainly still work. Also, keep in mind the "west side" has a lot of great newer areas so I am only speaking in general when I say the south side, beaches, gate parkway, and mandarin areas are a little more desirable. Again, do not want to offend anyone on the westside because there are great areas over there but it just not as centralized with access to other parts of the city. I hope that helps

Originally posted by @Robert Hetsler:

There is no hard and fast rule on the holding period unless the purchase was from a family member (then 2 years but there are specifics on who qualifies as a family member).  Having said that, in an audit or IRS challenge, the decision is all going to turn on your intent at the time you purchased the property you are considering converting to your primary residence. Armed with thag knowledge, you should have evidence of intent to hold for the foreseeable future (i.e. pictures of for rent signs, printed Craigslist adds trying to rent etc.....) because the burden is on the taxpayer if challenged so you want to go ahead and secure the evidence now why it is readily available.  I hope this helps.

The other thing to keep in mind is that, assuming you successfully convert the property to your primary residence, the capital gain treatment is different with respect to holding periods so you want to ensue you fully understand those rules prior to selling.

There is no hard and fast rule on the holding period unless the purchase was from a family member (then 2 years but there are specifics on who qualifies as a family member).  Having said that, in an audit or IRS challenge, the decision is all going to turn on your intent at the time you purchased the property you are considering converting to your primary residence. Armed with thag knowledge, you should have evidence of intent to hold for the foreseeable future (i.e. pictures of for rent signs, printed Craigslist adds trying to rent etc.....) because the burden is on the taxpayer if challenged so you want to go ahead and secure the evidence now why it is readily available.  I hope this helps.

@Brent Hill That would be fantastic.  I am a native of the area (actually grew up in Fruit Cove and graduated from Nease high school many years ago when it was a 7th-12th grade school.  I have a decent size practice but they are all over the country so I usually talk "shop" with my clients but it would be nice to be around a lot of people who have similar interests as I love real estate and real estate investing in particular.  My email is below or you can reach me on my other email which is [email protected] to continue discussions.  Thanks for the offer

Everyone above is correct and @Dave Foster is correct.  The only thing I would add to that is that if for some reason the house in question was purchased as a 1031 exchange and then converted into a primary residence, the Section 121 rules are still that you reside in the house 2 out of 5 years but the caveat is that under this one limited fact based circumstance, where the primary residence was purchased as a 1031 originally and then converted into a primary residence, is that the 2 years that you have to reside in the marital home must be 2 consecutive years and also must be the 2 years immediately preceding the sale of the home.  Not sure it that is applicable but it something that a real estate investor should know as part of their body of knowledge.  Again, that is the rule as I remember it so if that is your situation, I would certain take a deeper dive before giving that advise.