NNN Properties - What to know for a 1031 Exchange
Being in the business 17 years and talking to thousands of investors the 1031 process can often be somewhat of an unclear mystery to them. Unless investors are buying a ton of properties frequently they do not often use the 1031 exchange.
In these times especially for investment grade NNN properties that usually receive multiple offers TIMING is key.
The 45 days to ID up to 3 choices ( the 1031 exchange set up most people use) can go by very fast. This is why it's important to have a PLAN in advance. My clients looking to purchase NNN properties often contact me months in advance even 6 months to 1 year sometimes.
The best planners tend to have the best outcomes. In a 1031 you have to find the right property to purchase, verify the lease, and make sure proper financing is available before setting as a 1031 selection. You don't want to wait until the last minute to lock a property choice in and find out there is a major problem with the property. Then you try to move on to other 2 choices and they might already be under agreement and you have a failed exchange with a huge tax burden among other costs to pay.
There are other options with a 1031 exchange for qualified investors such as UPREIT's and DST's. In a lot of cases it can be better to own property 100% directly over those other options if the down payment is large enough to get a quality tenant in a strong suburban to urban location with good demographics.
With a 1031 exchange you need to decide what type of asset class you want to buy in. Sellers will often ask me 1. Is the buyer only looking at NNN properties? 2. How long have you worked with them? 3. Have they bought NNN properties with you before? 4. Do they own other NNN properties already? 5. Have they been pre-qualified financially for a loan? 6. Are they working exclusively with you only to buy a property with a written agreement? 7. Can they provide proof of funds or the 1031 exchange letter? 8. Is this property their main selection or are they just looking for back up options?
They want to know all of this and more. The seller or listing brokers do not want a FALSE start. They want surety of close especially when choosing from multiple offers and buyers. Often the offer that wins and stands out is the one from a qualified buyer broker because the listing broker know they will help with the buyer and chances are much higher of keeping things on track and closing on the property. The listing broker wins because they land more properties to sell by looking good to their developers or larger clients feeding them business. On the flipside if a deal fails and they get egg on their face then the listing broker could lose partial or all future business from that seller that might own a lot of properties they might sell now or in the future.
It absolutely makes a difference being prepared and working with someone with a long standing reputation in the industry.
NNN Invest reviews about 1,000 properties a week for clients around the country with a special emphasis on single tenant and multi-tenant NNN properties.
Comments