1031 exchange into note investing?

[Ryan Stackhouse]

Hey everyone, I've been giving a lot of thought into investing in some first Lien, low LTV notes. I've been a real estate investor for the past 14 years and The equity has been great, the cash flow has been decent, but inconsistent, and I'm looking for a very consistent returns to be able to retire early from the workforce. I'm exploring the option of investing in notes to do this. My question is this: is there a way to 1031 exchange my proceeds from sales of my commercial properties and residential into notes that have higher returns? I'm trying to accomplish a tax strategy where I don't have to pay capital gains and depreciation. Any suggestions?

[Dave Foster]

@Ryan Stackhouse, In order to get the deferral of a 1031 you must be selling investment real estate and purchasing investment real estate. The underlying mortgage and note doesn't qualify as actual real estate.  So the only way for you to move into notes is to pay the tax first and then use the remainder to start note investing.

If you're looking for consistent stable passive mailbox money and want to keep the deferral going on the gain then you could consider TICs, DST,s or wholely owned NNN properties depending on what size of portfolio you're looking at.