First time 1031, looking for advice

[Elaine Hester]

Hi! We are new to investing and BP and jumped in head first and went pro—that's how I roll. HA ;D

Brief Background:

We have a 2BR SF Bay Area condo that we'd like to 1031 in 2018 when our current tenant's lease is up at end of May. I'm planning ahead because we've never done this before and want to get educated and be prepared. 

We have approximately $150K of equity and would like to exchange it for a multiplex in the San Diego area. I'm starting to analyze properties just to get a sense of what we're looking at, but would love to hear from folks with experience things like basic steps, expecting the unexpected, what they wish they knew the first time they did an exchange—or any other tidbits you can offer a newbie from an experienced point of view. 

In the right situation, we may consider partnering. 

I don't want to overwhelm you with unnecessary information, but happy to provide answers to any questions you might have.

Thanks so much in advance!

Elaine

[Dave Foster]

@Elaine Hester, Yep, I'm one of those folks.  The qualified intermediary is a required part of a 1031.  They must be in place prior to the closing of your sale to begin the 1031.  We don't replace any of your other professionals but work hand in hand with the title company or attorney closing your sale and subsequent purchase to document your exchange and ensure property transfer of money.

The 1031 is extremely powerful in it's ability to let you defer paying tax on the gain from a sale and use those deferred taxes in subsequent purchases.  As long as you continue to hold or as long as you 1031 whenever you sell you an defer those taxes indefinitely.  We have clients on their 2nd and 3rd generation of tax deferral on portfolios.

But like everything of value, the devil is in the details.  1031s come with some pretty restrictive procedural requirements.  They're not too onerous but do require attention.  That's another big role for the QI before and during the exchange.

I've pmd you to forward a white paper on the 1031 process that many find valuable.