1031 Exchange in Virginia

[Elizabeth R Matthews]

I am selling a property in Virginia and want to know if I should set up a 1031 exchange. I bought it for 600k in 2002, and lived in it as my primary residence. In 2005 I moved to Louisiana and rented it out, thinking I would sell it within a couple years once I was sure I would stay in Louisiana. But then 2008 happened and I couldn't sell it - it didn't sell. So I have kept renting it out since then, taking a loss every year (rent did not cover expenses of taxes, insurance, maintenance, mortgage payments) so never any cash flow from it. Now I am selling it for a 925k sales price, I will have to pay off around 300k of mortgage and then there is the realtor fee (3%), a seller contribution of  20k. All said, I am not coming out much ahead for a property I have owned for 20+ years and had the hassle and expense of maintaining. That said, should I do the 1031 exchange and look for a property that would get me a better return? Would I have to buy something at 925k less realtor fee, in order to get the tax shelter? I don't want to take out another mortgage so I would prefer to get something at the price point of whatever the cash proceeds end up being. Are there properties out there that are a good investment to be had right now? My closing date is May 31, is it possible to get a 1031 set up at such a last minute point in time and is it even worth it? Maybe its better to pay the tax and put the remaining cash in a high interest yielding account. And how long would I have to find the new investment property if I did the 1031 exchange. What if I can't find something I want? Any advice or thoughts will be appreciated. I am nearing retirement age so I don't want to tie it up for another 20 years unless I am getting some cash flow right out of the gate.

[Maureen McCann]

Hi Elizabeth...Sean gave you some excellent advice and guidance. You still have time to set up a 1031x for your VA property. I like Sean's suggestion of just setting it up in case you utilize it and find replacement property(s) within the allotted timeframe.

This is where I may be of value to you.  You mentioned you do not want to take on any new mortgages and you are close to retirement. This tells me that the more monthly cash flow we could generate for you now the better, correct?

If this sounds good to you and you want to learn more then feel free to DM me. 

Cheers,

Maureen