Where or what would you buy with a 1031 Exchange for long term?

Question

Trying to decide what and where to buy with 1031 Exchange money. We live in Fort Worth where we have a handful of single family homes already,

Dave Foster · Answer

@Lidia Bowers, This is the problem with 1031 exchanges - too many choices.  You just heard several great options.  Are they great for you?  Who knows.  But the freedom to change asset class and location while keeping your profits tax deferred in the 1031 is incredibly valuable.

So put on your "Great Carnac" and guess with the rest of us.  I'm partial to self storage still (but not for long as everyone's jumping in).  And I think the era of "home ownership" subsidization that the new administration seems to be ushering in will make starter single family homes have some pop.  Students will return to colleges so student housing is still good.  And vacation rentals are always a great transition because you're strategically preparing for the end but also still generating income on your way out the door.  I love the purchase of vacation rentals followed by a conversion of them to primary residence and a tax free sale of your current primary.

So many choices - like a candy store.

Mike D'Arrigo · Answer

@Lidia Bowers it's not really possible to answer your question without understanding your goals and criteria. Keep in mind that many markets have a shortage of inventory and depending on how much capital you have to deploy, it might be difficult to find enough properties within your 45 day identification period so start your search early. Make sure that whoever you are working with knows that you are doing a 1031 exchange and that they know your timelines. The better you communicate, the better your chance of success.

Paul Moore · Answer

Hi @Lidia Bowers. This is a very tough situation to be in. I've talked to quite a few investors in the last month or so who are stuck in this situation.  I am getting ready to sell a large asset next week, and I have decided to either (1) do a 1031 exchange into an underpriced off-market recession-resistant asset (extremely hard to find!) or (2) invest in a DST (Delaware Statutory Trust) -- these vehicles accept 1031 funds on a fractional basis, or (3) invest in an asset in the same calendar year with high bonus depreciation (which is typically accessed/proven through a cost segregation study). This highly depreciating asset can actually be in a DST if you divest an asset that is generating a passive loss, not an active one, unless you are a QREP (qualified real estate professional).

I know I threw a lot at you.  Feel free to reach out if you want to discuss this briefly.

Matthew McNeil · Answer

Ping @Dave Foster.

Alex Olson · Answer

@Lidia Bowers I would look at out of state markets and of course I am partial to Kansas City. If you look at this forum there are hundreds of people that swear by investing in KC. I happen to be a 1031 exchange real estate agent and help people develop a team in KC (lender, PM, insurance, attorney, etc...), find properties, and get things across the finish line. First though, read David Greene's book on out of state investing. It will provide a short framework of where to start.

Bob E. · Answer

How much are you looking to redeploy?

Chris Miller · Answer

@Alex Olson hi can one accomplish the 1% rule in Kansas City?  I’m looking to possibly 1031 out of state somewhere and wanna find a location that’s growing with plenty of jobs, etc and decent area.   Not totally ghetto.  How’s Kansas City? Thx!

Christopher Mosher · Answer

Good evening, i just caught this thread about 1031's. i have current ownership of a dockiminuim. we never use this and collect seasonal rent for it. i was wondering if this can be used for as  a "1031" to shift assists into another property to not use, but increase roi?

Kyle Winther · Answer

If you do not want to manage another property then the 1031 DST route might be the best for you. The DST will provide you passive monthly income, deferral of capital gains tax, and participation in the appreciation on the DST properties. If you would like to learn more about the 1031 DST, I would be happy to discuss it with you. You can direct message me or email me - kyle at winthco dot com

Where or what would you buy with a 1031 Exchange for long term?

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