Possible Failed 1031 & Alternative? Deferred Sales Trusts?

[Matthew Orton]

I'm in the middle of a 1031 exchange with three multi-family properties identified and at the end of my 45 day window. I originally had two student housing projects in escrow and on day 43 of 45, the lenders backed out and I had to scramble to find new properties in less than 48 hours. I completely understand why they did, with universities closing and students vacating

With the volatility of the markets right now, I'm more than a bit reluctant to pull the trigger on any of the multi-family projects that I selected, knowing that I will be walking face first into issues with vacancies, moratoriums on evictions and ensuing legal issues not to mention the possibility that the lender could decide not to fund at the very last minute.

I've been investigating possible alternatives to a 1031 exchange (outside of paying capital gains) and the only real alternatives I'm seeing are the Deferred Sales Trusts and 453 Installment Sale options. With the Deferred Sales Trusts, I see that there are built in fees (~1.5%) that are there to pay legal in the event of an audit, which begs the question...if they are legit, then why would the possibility of an IRS audit be built into this transaction?

Any other options out there I'm not seeing?