Other than 1031 Exchange what are my options?

Question

I own a condo in a highrise building in San Diego with about $400k in equity, It used to be my primary residence but have had renters in it for about 3 1/2 years. So other than keeping it if I sell are there any other options than either exchanging it or paying the capital gains on it? Im worried about tight inventory right now if I were to sell and attempt a 1031 exchange.

Due to the eviction moratorium have there been any change living in the property for 2 or the last 5 years rule? It hasnt been my primary residence for 3 1/2 years.

Thanks.

Due to the eviction moratorium have there been any change living in the property for 2 or the last 5 years rule? It hasnt been my primary residence for 3 1/2 years.

Thanks.

Todd F. · Answer

Thanks for the replies.

Dan H. · Answer

Woulda, coulda, shoulda ...

Too bad you did not decide to sell just over 6 months ago.  Two of 5 years would be valid.

Unfortunately, I have not heard of any loosening of 1031 requirements.  In addition, there are some people speculating that the 1031 could be eliminated or altered.  I personally do not think it is likely, but there are some people who think it is very likely.

Good luck

Bobby Nilsen · Answer

@Todd F.

I know San Diego is a tight market but with that said if you find the right deal selling your condo won’t be an issue and you could do a reverse 1031. It doesn’t happen often in these markets but you could also find the right off market and if the condos in your building are flying get it contingent upon yours selling, or give yourself enough of a contingency to get your condo in contract contingent free.

Find a deal that’s been on market for some time and go for the terms you need. You may not get exactly what you want but you can trade up. If you want to chat pm me.

Maxwell Ventura · Answer

@Todd F.

Where are you looking to purchase after the sale of your condo?

Inventory downtown is pretty good right now at about 4.5 MOI but can also be harder for a seller right now. Units don't go as quick and can sit for a while unless your unit stands out among the similar comps.

Or are you looking to purchase something other than another condo downtown?

1031 or Cash out refi (depending on how much equity you have)  will likely be your best options.

Dave Foster · Answer

@Todd F., @Bobby Nilsens idea of a reverse exchange has a lot of merit in an inflated overheated market like where you are.  It all depends on price point of course.  And your ability to deal with the complexities of the financing component of the Reverse.  But the ability to have the new property under your complete control for up to 180 days before you have to close the sale of your old property could be invaluable.

But reverses are expensive.  And really as we see the moratoriums start to impact things I think there may be some less extreme things you can do to mitigate the tight time lines of a regular 1031.  The first would be to find one of those stressed out and stretched individuals who are worried about near term and would be willing to sell you the property on a contingency for you to get your old property closed.  Anyone with any flexibility at all is going to also know that your property will sell quickly.  And you might be surprised at their willingness to wait a little for you.

But also don't forget that although this is a sellers market you also are a seller.  And we've done several exchanges recently right in your neck of the woods where the relinquished property was put under contract contingent on the seller finding a good replacement for their 1031.  Buyers are willing to wait because each day is closer to a covid resolution.  And because in an appreciating market they have their entry price locked up.

Either one of these would work as well as a reverse but be much less pricey.

Twana Rasoul · Answer

@Todd F. I did cash out Refis myself...maybe that is an option for you.  1031 exchange is still possible and there are different ways to buy yourself some more time and you can also consider a reverse 1031 but that is completely different story, more costly and that most wouldn't be able to do.

Cash out Refi or 1031 are you 2 best options in my opinion if you don't qualify to take the take savings as your primary.

Other than 1031 Exchange what are my options?

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