1031 exchange vs opportunity zone

[Jason Woods]

Hi All,

I have an investment property I'm selling in the next couple of weeks, which I bought in 2016 with $250k, expect to get $400-450k after expenses, with capital gain of $150-200k.  I'm looking into options on what to do with the funds.

1. Take the cash and pay tax on capital gains ($150-$200k, could be more with the depreciation recapture in the past 5 years)

2. Do a 1031 exchange and defer tax. I don't want to buy and manage another property myself, so I've been looking into DST 1031 exchange which I can buy ownership and have other people manage it for me. Has anyone had experience doing that?

I've been looking at 1031crowdfunding.com website and their deals, has anyone used this site? Would you recommend them?

3. Take the profit portion from the sales and invest them in an opportunity zone fund, again I'm looking at the deals on 1031crowdfunding.com, any experience sharing would be much appreciated.

Given my case, which option would you recommend?  What're the pros and cons of each option? TIA!

Jason

[Jason Woods]

Thanks all for your input, very much appreciated.

I don't need the cash, but my partners wanted to sell so we're selling the property.  We've had a good run, property value almost doubled since we bought a few years back. 

I don't want to spend time to buy another investment property and manage it myself, I want to spend my time on other things, that's why I've been looking at other passive options. I've been looking at DST 1031 exchange, it's just seem so complex, the fee is also high, as Christopher mentioned.

Opportunity zone fund is attractive to me because I only need to invest profit (smaller portion), tax defer is good enough for me, I expect to be lower tax bracket in 10 years.

My biggest challenges is to find the investment managers I can trust.  I'm totally fine paying them if they're good and can provide value to me, but I find a lot of them lack either integrity or capability, sometimes both.  I have to spend a lot of time on identifying the right managers and deals, monitoring them, which isn't my idea of passive.

On the plus side, if I can figure out DST 1031 and find trustworthy managers, I can rinse and repeat with my other properties with the same process. I probably won't be very excited with the returns I could get from them, I got lucky in the past decade and have had a great run doing it myself.