Selling a 42 unit portfolio to 1031 exchange into a 100 unit Apt Complex

[Stephen Jones]

BP,

I have a multifamily portfolio of 42 units. When I begin my real estate journey, my goal was always to scale my business and scale is as quickly and as wisely as I could. I now have an opportunity to scale my number of doors and I would just like a little advice on people who have had experience with selling their portfolio in exchange for a larger/bigger asset. My current portfolio does well, is in good locations (I would say B areas) and operates just fine. It consists of a 12 unit, 16 unit, 8 unit and a 6 unit. All nearby each other with the exception of the 8 unit property. Rent roll is good, not any huge expenses that I've had to deal with etc. 

The asset that I am currently looking at is in a town that isn't the very best, but not the very worst either. With that being said, it is on the outskirts of town, next to a major highway, fast food, grocery store in backyard, you can spit on Wal mart from there, across the street from a nice gym, etc. It is a property that a multifamily real estate investor dreams of (An actual apartment complex). It has its own office, laundry facilities, BBQ grills around the perimeter, etc. The exterior of the property is also extremely well kept. It consists of 1 beds, 2 beds, and 3 beds. I am yet to enter any of the units as we are still in the early stages of the process, but from what Ive seen from the numbers so far, they seem to run right. 

I know the information I've gave you today is fairly brief, but I just wanted to see if anyone here on BP has had an experience like this on this big of a scale? If not, any feedback or advice would be greatly appreciated! Thank you!

[Dave Foster]

@Stephen Jones, The strategies for this I see most often with our clients are

1. Control but not own the replacement property.  Get either an extended closing date.  Or get a master lease for the property with an option to purchase.  Then sell your properties within 180 days of each other and combine the 1031 exchanges into the purchase of the optioned propety.

2. Portfolio sell yours.  Sounds like there may be some interest.  

3. A reverse exchange.  The QI for the 1031 takes title and holds the new property for 180 days to let you complete the sale of your old properties.  Not preferred because of the cost and financing.  But in the right circumstances a good option.  One thing people forget with Reverse exchanges is that as long as we hold the new property you are getting the cash flow.  And as long as you own the old properties you get the cash flow.  so it is possible to double dip cash flow for up to 180 days.  Which is more than enough to pay for the reverse exchange even with higher temporary borrowing costs.