1031 Exchange into Multifamily

[Nicole Wu]

My husband currently owns a paid-off townhome near Charlotte, NC, which is currently being rented out and generating steady cash flow. The lease is about to end, and we are considering selling the property and utilizing the proceeds to purchase a multifamily property to expand our investment portfolio.

We are thinking of using a 1031 exchange to defer capital gains taxes since the sale will trigger a capital gain. Our plan is to use the entire sales proceeds of approximately to purchase the new investment property. However, we have never done a 1031 exchange or purchased a multifamily unit before, and the time requirements are stressing me out.

I would greatly appreciate your advice on where to begin. Should I focus on searching for the new investment property first or on selling the old one? Is it possible to do both simultaneously? Is a 1031 exchange a feasible option for accomplishing this? Any advice or resources on strategies would be highly appreciated.

[Bill B.]

You want to be looking for the replacement while selling the old one. In a hot market many buyers won’t accept a contingency based on your other house selling. But get your favorites lined up and be ready. I had 5 properties ready to send offers the second we closed Friday June 30th. Saturday July 1st we had an accepted offer. (Since our offer had a huge down payment and no contingencies…)

I used @Dave Foster he’s been on BP for years and is not only Knowledgable but helpful. If you have questions check Amazon. He just released a short book that will answer most of your questions. I’m sure he’d personally answer the rest of you reached out to him.