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I have a question about an in-kind 1031 exchange. From what I understand, the steps are essentially as follows:
Sell an investment property;
hand your capital gains to a qualified intermediary;
identify a like-kind property with 45 days;
negotiate with the seller of the like-kind property;
agree on a sales price;
have your intermediary wire the capital gains to the title holder or the title company;
fill out the IRS form.
My question is how does this impact the borrowing stage?
Most realtors, I believe, will not (or don't like to, understandably) work with an individual who is not at least pre-approved. How does one get pre-approved for a new mortgage before the sale of the initial property to begin looking at replacement properties? Does one have to wait until the initial property sells to begin looking (which will start eating into that 45-day window to identify a property)?
We plan to sell our investment property first, do the exchange, then sell our primary residence. We have mortgages on both properties, and would not be able to get a 3rd mortgage pre-approval before the closing of the investment property.
It seems a bit too tight for comfort to have to do approval and identity within 45 days and would like to begin both of those before the initial sale. Hope that makes sense.
I am by no means an expert, but I think the 45 days requires that you identify a 'potential' replacement property. Contact a 1031 exchange intermediary that serves your area and ask them the details.
I am by no means an expert, but I think the 45 days requires that you identify a 'potential' replacement property. Contact a 1031 exchange intermediary that serves your area and ask them the details.
Yes, I believe the 45 days is to identify, and then one has 180 days to close. I am confused about the financing though - the procedure.
Sell investment property
Take gains to new like-kind property
Expecting new like-kind property to cost more
Will need a mortgage for the remaining cost of the new investment purchase.
The intermediary does all the heavy lifting. You will need a lender with a bit more fluency than people tend to get when their only search criteria is whoever promises the lowest rate.
Sell investment property
Take gains to new like-kind property
Expecting new like-kind property to cost more
Will need a mortgage for the remaining cost of the new investment purchase.
Is this what you are asking?
I have an understanding of the basic steps. The funding is the question. Once, we sell the old property, I understand it is held in an escrow account by an intermediary. Do we then begin the step of lender approval after that point, or does one begin talking to the lender before that. Obviously, we would not get approved for a mortgage until after the old property sales, because of the current mortgage on that property combined with our mortgage on our primary residence.
I may be making a mountain out of a molehill and obviously tons of people do this all the time, but I have yet been able to find my answer anywhere - haven't begun the process yet other than having discussions with sellers agents to get ready to put the property on the market.
Quote:
Originally Posted by Pfhtex
The intermediary does all the heavy lifting. You will need a lender with a bit more fluency than people tend to get when their only search criteria is whoever promises the lowest rate.
It is more like a typical investment purchase. You can qualify for a new investment loan before the investment closes. Your new lender will need the settlement statement from the sale.
Where you may have an issue is two new property loans in a short period of time.
It is more like a typical investment purchase. You can qualify for a new investment loan before the investment closes. Your new lender will need the settlement statement from the sale.
Where you may have an issue is two new property loans in a short period of time.
Often it is easier to do a direct property for property, than to fool around finding a buyer and do a 1031 exchange the way you are considering. Often you can come out much better financially.
You need to find a 1031 exchange specialist to do this. I did hundreds of them during my career.
You need to find a 1031 exchange specialist to do this.
Agree.
The specialist is likely to know lenders that also specialize in 1031 exchanges.
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