All Forum Posts by: Eric Black

I don't think anyone has a perfect understanding of the exchange rules and I would be wary of anyone who claims to. If you contact any CPA or any 1031 Intermediary they will give you the following information:

* The value of the replacement property must be equal to or greater than the value of the relinquished property.
* The equity in the replacement property must be equal to or greater than the equity in the relinquished property.
* The debt on the replacement property must be equal to or greater than the debt on the relinquished property.
* All of the net proceeds from the sale of the relinquished property must be used to acquire the replacement property.

Dave is correct, there are two "basic" rules, but anyone who has done a 1031 exchange will also tell you there is nothing "basic" about them. Sure, you can choose to not follow one of these guidelines and hope for the best but be sure you have the money to pay the capital gains taxes. Just in case the advice you got wasn't perfect. I'd rather be safe than sorry. And for clarification, if you don't meet this guideline, it won't void the exchange but the difference in the debt may be taxable.

Dave is also correct in that if you are just swapping property with someone else then these guidelines don't apply.

Hi Adrian,

These are good questions and kudos to you for planning so far ahead. I am just completing a 1031 exchange, sold a rental in CA, bought two in Texas. You don't need to be "concerned" about the timing, you just need to be prepared. You will want to talk to a 1031 company because when you identify over 3 properties in a 1031 exchange the rules become even more complex. I don't remember them all because I did not identify more than 3 properties. I don't want to sound like I am plugging a company so if you want to send me a private message I'd be happy to refer you to the company I used. Their pricing was very straight-forward and easy to understand and there were no hidden fees.

The other question is, how much is your debt on the property in Santa Monica, or more importantly, what will it approximately be in 2-3 years when you decide to sell? One rule of the 1031 is that you must obtain equal or greater debt than what you had on the property you sold. So if when you sell your property you still owe $200k, then you would need to finance at least $200k (or $201k to be safe) to qualify. However, once you have met that you don't necessarily need to finance the other properties. So if you exchange your property, then finance 2-3 other properties to get you to that debt minimum, then any funds left over can be used to buy other properties all cash. This would probably reduce the number of properties you could buy however you would own them outright and if you wanted to then do a cash-out refi at 50% of the value it would be easier than doing a financed purchase and you could spread them out so they're not all happening at the same time.

I hope this helps and good luck in your planning.

Hi K. Email is on its way!

I have a Bakersfield, CA SFR under contract. Here are the details:

3/2, 1500 sq ft, in-ground pool, koi pond (concrete, not plastic), 17,000+ sq ft lot.

I purchased for just under $175,000 including arrearage and seller move-out. Approximately $10,000 in repairs needed, not including roof. Shake roof has 1 year certification remaining.

Loan is 2 years old, fixed rate. Monthly payment is $1259 PITI.

Referrals fees paid for end buyer referrals. End buyer price $203,900. Willing to carry for end buyer with minimum $30k down.

Willing to sell contract for $10,000 to investor.

Reply to post for details.

Eric

Hi Steve,

Thanks for the reply. We haven't asked because we haven't opened the account yet. We have one lined up. So in the mean time I am asking on here because we may need to decide quickly on this property but I'll call the agent we'll be using and confirm with them.

We are getting ready to close on the sale of an investment property and we will be doing a 1031 Exchange.

My question is, can we enter into contract on the next house prior to closing on the sale of our house or do we have to wait until after our sale closes for it to qualify for the exchange?

Thanks in advance.

Thanks for the input Rick. Looks like I'll be making a trip down to the court offices looking for the infamous clipboard!

I have been investing in buy & hold real estate for about 6 years now and am looking to get started in wholesaling. I'm in Santa Maria on the central coast and looking for mentors or anyone to let me me follow along and observe to learn the ropes, or just ask questions. I've been been spending hours reading trying to figure out the best approach but have decided I just need to take some sort of action but not sure where to start exactly.

I called the local probate court office and was told that the probate case information is not published in the newspaper by the courts (it is the defendant's responsibility) and that there is no way to get the information at the courthouse or online. I find that a little hard to believe but I was in no position to argue.

Love the site and appreciate all of the input and advice from everyone and looking forward to getting started!

Thanks for any advice/suggestions/recommendations, etc.