All Forum Posts by: Caroling Lee

Hi Everyone:

I'm new to BP, been listening to the podcasts for a few months and just getting my feet wet on the forums. I've been trying to jumpstart my real estate investing for the last year and recently purchased my 2nd property. (Technically, I'm becoming a real estate investor by default, as I will be moving into my 2nd property as my primary and turning my current home into an investment property).

As luck and timing would have it, I'm simultaneously being thrust into more real estate investing as a piece of land that's been in my family is now under contract and I've been learning about 1031 Exchanges on the fly (we're closing in a few weeks). 

Now, I'm faced with finding a replacement property from the proceeds of the land sale. I'm eager to locate a real estate agent in the Austin area (open to San Antonio, San Marcos and other areas) who can help me locate a MF property within the next 45 days (per the 1031 Exchange rules). I'm also exploring the possibility of partnering with my brother and his proceeds from the same land sale to also look in the Houston area (that's where he lives with his family). 

Can anyone on recommend someone in the greater Austin or Houston area who can jump on this opp and help us find a duplex, triplex or fourplex?

Thank you in advance!

For those of you interested, I'm copying and pasting @Dave Foster's answer here:

The way the IRS views it is that the tax payer for the old property must be the tax payer for the new property in a 1031 exchange. Usually this is who is on title but not always because titling real estate is a state thing. Because it is raw land I doubt that it has been reported on anyones tax return. So we have to dig a little deeper.

Your property is probably one of two ways.

1. Either your cousin has not quit claimed and it is in his name but you have documents indicating that you are a 25% owner and have been for years. In that case you could do a quiet claim at closing to put 25% of the property into your name right before it conveys to the new buyer. This is not my favorite way to handle it because the IRS is touchy about transfers of title right before a sale. But you'd have a good defense with the argument that the title was only changed to reflect actual long term ownership.

2. Or, the partnership your father set up is actually the owner. If it is a recorded partnership and has it's own tax ID then you probably own 25$ of the partnership not 25% of the property even though that seems like the same thing it's not in the eyes of the IRS. If you actually own the partnership then the partnership would have to do the exchange. But there are ways to work around that whether you are the only one who wants to go forward with an exchange or whether others would as well.

So for right now it looks like you've got options but we need to flesh it out a little more. The easiest first question is to verify deeding. Did your cousin quit claim it and if so how is it titled now - in the partners names as tenants in common or in the name of the partnership.

@Dave Foster Thanks so much for all the great information!

Sounds like I would need to identify a completely different property outside of the new construction primary residence (already under contract) and my current primary (soon-to-be investment) property because the mortgage already exists. And the timing could be another factor with the 180 day limit. 

I think the best way forward is to simply ID another property, which I'm fine with doing. Seems to make all things easier. 

Thirty years ago, my mom and dad purchased a 30 acre piece of land in Huffman, TX with my 2 cousins. They paid $40K for it total. My parents put down the $20K and my cousins paid off the rest in payments.

The title/deed is in my cousin's name. Over the years, my mother 'gave' the property to my brother and I and about 7 years ago, my brother created a partnership to make the ownership legal. At that time, my cousin (whose name is on the title), did a Quit Claim Deed to indicate that we all shared 25% each in the property.

We are currently under contract at $285K and I'm interested in using the 1031 Exchange to defer taxes on my portion of the proceeds (approx. 25% which would be around $60K)

• Can I execute a 1031 Exchange if the title/deed is in my cousin's name?
• Does the Quit Claim Deed mean that I have 'ownership' and can use the 1031 Exchange?
• Can anyone recommend a Qualified Intermediary?

I recently put a down payment on a new construction home that won't be ready for move-in until Dec. 2017. Sale price $360. It will be my primary residence. Would this qualify as a replacement property? If not, I have my current primary residence that I plan to convert to an investment property. Could I put the proceeds to my current, but soon-to-be investment property?

I've searched all over the internet for some insight into this, but figured it was such a specific question, that the Bigger Pockets community was my best bet to finding some advice/answers!

Thanks in advance!