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Updated over 4 years ago on . Most recent reply

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12
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Wesley Brown
  • Los Angeles, CA
2
Votes |
12
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Can I invest in my Cousin's 1031 exchange?

Wesley Brown
  • Los Angeles, CA
Posted

Hi - My cousin is closing on a family farm he inherited and is looking to do a 1031 with a multi-family. He'd like me to be involved to manage the finances of it for a bit of sweat equity and I'd also like to put in perhaps 10% of the investment. Let's imagine that would get me 15% of the investment. 

Is that possible on his 1031? What would be the best way to structure that, if so? An LLC? Here in CA they are $800 per year so not a small percentage of our potential yearly net income. If it is an LLC or other type of corporation, would we take the mortgage out in the name of the LLC? How would that work for his 1031?

Many thanks!! 

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Dave Foster
#1 1031 Exchanges Contributor
  • Qualified Intermediary for 1031 Exchanges
  • St. Petersburg, FL
9,355
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Dave Foster
#1 1031 Exchanges Contributor
  • Qualified Intermediary for 1031 Exchanges
  • St. Petersburg, FL
Replied

@Wesley Brown, nailed by @Katie L. and @Brandon Bruckman.  The only thing to add is that when you adjust the percentages so your each tenants in common his 85% tenant in common interest will need to be an amount that is at least as much as his net sale if he wants to avoid all tax.

  • Dave Foster
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