1031 Exchange Option Questions

[Zachary Bellinghausen]

I have two B+ condos in A+ areas and have no mortgage on either property. I would like to leverage these assets as they have appreciated drastically the last 6 years. I would like to consolidate all my funds into one large deal for economy of scale and to have everything under one location. My current bank is not allowing me to refinance and draw equity due to the corona virus, many other banks I called said the same. I should have done month to month leases with my tenants when they renewed, as they are now on lease until July 2021. If I were wanting to sell these properties, I could possibly give them both two months free rent to move and find other arrangements. Both of my tenants are college students and not sure if they would even go for that in the middle of the school year. Also, does anyone have experience in doing a 1031? Say I found buyers for both of my units, if they were not in a hurry to move and could wait, have you ever heard of anyone signing agreement to purchase at a later date in the instance my tenants were not moved out and I do not have the replacement assets picked yet? Not sure if this would be against the law. Any thoughts from BP would be greatly appreciated!

[Arn Cenedella]

@Zachary Bellinghausen

A couple thoughts.......

Your notion to combine equity and buy something larger makes total sense to me.

You can sell subject to the lease. Maybe offer tenants a $100 discount every month in return for being co-operative with showing. You might be able to sell to an investor who is happy to have a tenant or tenants in place. Or sell to an end user owner occupant who can wait until lease ends to move in.

You could offer tenants cash to move out early.

You could have a contract that specifies close occurs when tenant or tenants move.

You could include a clause extending your close if you need additional time to find a replacement property.

So there are lots of ways to go........

You have lots of options......

I have completed dozens of 1031 exchanges.

One work with a good exchange company. I use a First American Exchange but there are  many others out there. They know the rules the ins and outs and can guide you through the process.

Key point, if you are to embark on this plan, you need to be realistic on the market value of the properties you sell and the property you buy. If you are realistic with both, the 1031 rules give you plenty of time to locate the replacement property.