It's been a while since i posted anything. I'm currently the owner of a couple long term and a couple short term rentals. My second long term was just purchased via a 1031 exchange after selling our third short term rental. We are selling off our beach properties due to the rising costs of everything beach related, and the aggravation of property management companies. Our experience in the North Myrtle Beach area was painful at times. Area became oversaturated with rentals, cleaners sucked, property management was lack luster to say the least. Anyway, the real purpose of this post is to share some learnings from this recent sell.

Our North Myrtle Beach rental was our first rental, and the first rental we have sold. After purchasing it, we put it into an LLC, including putting the deed in the LLC. Fast forward to the sale and 1031 exchange, i began the application for a mortgage since the 1031 amount was about 60% of the purchase price of the new property. Naturally, the lowest mortgage rate was my goal, so i started applying for mortgages. Narrowed down to two banks and was negotiating with them. My offer to the owner was in my name. Why would i do anything else? Here's why. When doing a 1031 exchange, the name in which the sold property is recorded is what the offer needs to be in when purchasing the new property. So, in this case, the condo i sold had the LLC name on the deed. Therefore, my offer, and my mortgage i was applying for needed to be in the LLC name. Not mine. Simple fix right? Yes, but now that changes my mortgage application from a residential loan to a commercial loan. Which are a point or more higher than your standard residential rates. Some banks who offer commercial loans usually also have a shorter payback period. So, when you consider all of that, you may find yourself with a smaller cash flow.

So, what did i learn? Not to have the deed in anything other than my name if i intend to do a 1031 exchange. Change the deed prior to selling if the deed is currently in a business name. I also learned that you can purchase up to three properties thru a 1031 exchange. I was always under the impression that you could nominate up to three, then close on one prior to the expiration time period. Our exchange lawyer did not communicate that very well i think. Additionally, when negotiations between realtors is occurring, things not documented in writing don't hold up. Verbal agreements and understandings don't hold up. We got burned a little at closing due to the imprecise verbiage in the repair credit documentation. And if you are dealing with a difficult seller, and a shady sellers realtor, you'll be the one screwed over.

Cheers!

Baltimore, Maryland

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