Need advice on 1031 - Single Family Rental

[Stan Chin]

I'm a newbie with 1031 and with buying out of state. My SFR in San Jose will be closing within 30 days or less. I will have about $1.1M to exchange. I know I need to identify properties within 45 days of close and buy properties within 180 days of close. And have an intent to buy and hold. I am thinking of buying out of state for the cash flow. I need some ideas and advice as for the best use of my money. I went to a meetup and got some great information and contacts. Looking for minimal risk as possible with decent returns without being suckered into something by sharks. Currently don't have a QI or CPA, but looking and will soon. Some questions -

1) Should I use a QI and CPA that is local or nationwide?

2) Can I exchange for 1 or more multi-families?

3) Can I exchange for commercial property?

4) Can I exchange into a syndication?

5) What else would be a good exchange into?

6) Any advice as too what/where to buy and suggestions on how to vet any opportunities?

Thanks,

Stan

[Dave Foster]

@Stan Chin,  

1.  A QI with a national presence will probably function more smoothly for you since you're crossing states so there's more state nuance to deal with.  But any QI can perform for you.

2.  The number of properties is not what is critical (although there are some requirements in the identification process that can limit you).  It is the valuation - in order to fully defer all tax you must purchase at least as much as your net sale (contract price less closing costs but before mortgage pay off).  If your reinvestment target is 1.1 million that could very easily be exchanged for one 1.1 or more expensive property, or two, three or four etc that total at least 1.1 mil.

3. Qualified real estate is defined by use.  As long as it is your intent to "hold for productive use in business, trade or for investment" the type of real estate does not matter.  Both @Chris Mason illustrate some of the different options.  Commercial for residential, raw land for multi family - if it's investment real estate it works.

4. Syndications can work but they can also not qualify.  There are at two types of products that are specifically designed to work with 1031 investors - The Tenant in Common, and the Delaware Statutory trust.  They're not the only type of relationship that will work but are the most heavily syndicated. There are several folks on here that specialize in them.  I'll defer to their comments. REITS do not qualify because you are not buying real estate you are buying a security.

5. Last advice - Focus on building your team and pay very close fanatical attention to the 45 and 180 day window.  This is where the majority of exchanges fail.  If you can find the perfect replacement properties before you close the sale go ahead and get them under contract.  What is critical from the 1031 is that you close the sale before you close the purchase - Dates of contract do not matter.  And your QI must be in place prior to the closing of the sale.