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I want to do a 1031 exchange and sell a townhouse in the Dallas area with intact tenants for a rental in the Las Vegas area. I have been a Landlord/investor for decades but have never done this. How to start the process?
Do you have a handle on the market in Vegas ... ie, should it be fairly easy to find the new place?
If you have an agent, they should be able to put you in touch with an intermediary in Texas, who can tell you whether you need them in TX, NV, or both.
Can't say I've personally ever run across the "buy in a different state" scenario.
You need to find an accomodator to handle the 1031 for you. You can't touch so much as a penny of the money.
The accomodator will tell you exactly what the rules are, what you can and can not do, and what the time periods are, which are very strictly enforced. You get plentry of time to close, but the time you are allowed to find replacement property is tight
You need to hire an exchange company before closing the first place. Then you have 45 days to identify the replacement property. Key is to identify more than one property. Close on the second place. Easy Peasy
Location: Was Midvalley Oregon; Now Eastside Seattle area
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Identify up to 3 properties for your 1031, from date of closing of original property. 180 days from sale closing of your Old property to the close of New property. The challenge in tight markets is identify 3 at the end of 45 days, and then close on one . You could identify a property and in the process the the bidding. Theoretically you could identify as many as you like but only three at 45 days.
In Seattle, you identify and bid on a property and then loss the bidding. this you need to identify another. See your accommodator. In hot areas you are forced into acquiring quickly. You can not under bid and hope for a long negotiation period to find a better property or loan rates. This has been our experience.
Last edited by leastprime; 06-07-2018 at 05:22 PM..
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,072 posts, read 7,511,991 times
Reputation: 9798
Identify up to 3 properties for your 1031, from date of closing of original property. 180 days from sale closing of your Old property to the close of New property. The challenge in tight markets is identify 3 at the end of 45 days, and then close on one . You could identify a property and in the process lose the bidding. Theoretically you could identify as many as you like but only three at 45 days.
In Seattle, you identify and bid on a property and then lose the bidding with in 45 window of identification. Thus you need to identify another property. No more than 3 at 45 day stop time. See your accommodator. In hot areas you are forced into acquiring quickly. You can not under bid and hope for a long negotiation period to find a better property or loan rates. This has been our experience.
1: Straight exchange of one property for another. This may involve more than two properties with 3 or more owners involved. I have been involved in running exchanges with up to 7 properties some in different states, and in two different transactions were out of country properties one involved a property in Costa Rica and Belize on the other one.
2: Starker 1031 exchange, where a buyer is found for the first property, and with an Accommodater involved to hold the money, the first owner selects a second property they want to own, and the Accommodater buys it and delivers it to the first owner as a 1031 tax deferred exchange. This was what those above were talking about, when the talked about using an Accommodater and selecting up to 3 properties, etc. It is more complicated than a #1 exchange, even if the properties are in different cities, and different states. This may be the best route to follow, or if you are working with an exchange specialist, it is often easy to go the #1 route.
For either type of transaction, you should use a 1031 Specialist Realtor on the first sale to make sure they know what to do to make the whole transaction goes together to makes it a tax deferred transaction. Doing so moves your basis from one to the other property. To make it fully tax deferred, this specialist will make sure the first property is less in value than the second property, etc. to make it a fully tax deferred exchange.
I spent from 1972 till I finally retired as a investment real estate broker, which involved many exchanges around the country. I had top real estate home brokers, who listed property with me owned by themselves or an estate of inherited property with several heirs involved, as they knew they did not have the expertise and connections with other specialists in 1031 exchanges to make it work.
The second week after entering the real estate business, I exchanged a 16 unit newer well located apartment house listed in my office, for a down payment on a large irrigated farm half way across the state. It was a fully tax deferred exchange for the apartment owner, and a partially deferred exchange for the farm owner due to one exchanged for a higher priced property, and the other exchanged for a lower priced property. This was the last farm owned by this owner who was retiring. He acquired it to give to his daughter through a trust set up to save taxes where she received it at his death, but moved into it and operated it as if she was the owner from day 1. His daughter had been injured and could not hold her job any longer, and needed an income which this apartment house provided for herself and her two teen age children. She no longer had the ability to keep hallway cleaned, and the yard cared for, which the children did and earned some spending money doing what their mother was unable to handle.
No matter which type of 1031 exchange you do, be sure and use an exchange specialist, that understands 1031 exchanges, and has the contacts with other exchange specialists to make it work without tax consequences.
Last edited by oldtrader; 06-08-2018 at 12:30 PM..
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,569,440 times
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Talk to a qualified intermediary. They will guide you through everything. Keep in mind you can't trade down to a lesser value property.
I've done 4 exchanges
For your one for one exchange figure about a 700 fee .
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