1031 Exchange multiple properties

[Alex Chau]

Hi guys,

I am still a novice in real estate investing, and still just trying to learn as much as i can. My question is if you have multiple properties, lets say 3, for a 1031 exchange, can you sell all 3 at once and do a 1031 exchange to roll the proceeds into 1 larger property?

[Dave Foster]

@Alex Chau, What you are speaking of is a "consolidation exchange".  A very powerful tool to move from scattered ownership and higher maintenance into a larger better returning property that is also hopefully lower maintenance.  @Drew Reynolds is absolutely right - there is no limit on the number of properties you're exchanging into or out of.  And company's like his specialize in finding the replacement opportunities you may want.  But the key is in how your exchange will be structured. 

If you are selling several properties under one contract to one buyer then you can actually treat that as one exchange.  It will have one exchange fee and one critical path time line for identification and completion.  All you need to concern yourself with is making sure that you purchase enough real estate to absorb the combined net sales of the properties you are selling.

If you're selling several properties as individual pieces it can get a little complicated. You still have to purchase a large enough property to absorb the 3 sales but you also will have in essence three exchanges going with staggered closing dates and different identification and completion deadlines.  Still very doable but you'll want your A-team with you so you don't miss something and so that everyone is hustling to get you exactly where you want to be.

One other possibility, if the numbers warrant would be to do a reverse exchange.  You purchase through your QI the new property first.  Then as each of your old properties sells you can purchase a % of the new property the QI is holding for you.  These are more expensive and complicated but can mitigate some of the timing issues with the selling side.