All Forum Posts by: Jackson Hanssen

@Paul V. I'm in full agreement. In my opinion they're really only good for when you're ready to hang up the spurs, and your inheritors don't want the hard assets, so you keep the deferment rolling until you get a stepped up basis at death. 

One point of guidance I would give about the 1031 exchange itself. Improvement exchanges are a little more tricky so if you can structure the exchange where all of your equity + debt reinvestment can be dumped in at one time, you'll be able to do a forward exchange instead of an improvement exchange and it will save you on 1031 exchange fees. 

This is a viable path from a 1031 perspective, but I would encourage you to look into what TIC really means. Especially from a legal liability perspective. Because you have to keep the same taxpayer as owner from the relinquished property to the replacement property I'd worry that the legal protection you'd want for a development TIC won't be there.

DSTs have high fee but probably are the best path forward for someone who wants to be fully passive and avoid legal risk. It is one of the reason they continue to be popular despite the outrageous fees in my opinion. 

Highly recommend you don't also. Too complex and the need to bring additional financing in kills the value of the 1031. 

You qualify for installment sale treatment on the taxable gain if you go with seller financing, which is at least something. 

Like @Nate Herndon says, you won't need to close on all replacement properties on the same day, but you will need to close on all of them before the 180 days are up. 

Improvement exchanges are really complicated, and in my view unnecessarily risky for this type of asset. @Joey Samudio, I'd recommend buying the asset with a normal 1031 exchange and then layer on debt for rehab after purchase. Make it clean, de-risk the exchange process and simply your costs for the exchange. Then pay off any debt when you refinance into whatever permeant financing structure you'd like. I'm sure @Nate Herndon can help you through that process. 

Hi All,

I'm a 1031 QI, looking to connect with some CPAs in the Bay Area to be able to refer clients to. We're doing various REIA outreaches and we're looking to build up a dense talent network of CPAs, Attorneys, Brokers, Lenders, and financial advisors to give our clients options to fill in any members of their team they are missing. If you're a CPA, or any of the other service providers mentioned above, who works specifically with real estate investors can you please comment below?

What is your yield looking like? What is the customer demographic that is driving STR/MTR in Fargo? Energy workers on an irregular work schedule?

Unless there is an investment available to you where your IRR would be greater than it is currently and the amount of work would be the same I would say keep it.

You have an interest rate that is unlikely to be available for another century, Hold the asset and let the tenant burn down the mortgage. If you really need to buy another asset, consider a heloc for $200k of equity cash out and use that as a down payment for the next asset.

As many have said here, back out and take the tax hit. DO NOT let the tax tail wag the dog.

Tax considerations are an important part of real estate, but the actual investment is way more important. As a silver lining, when you buy the next property you'll have full basis for depreciation. 

A question about the building, will you own the ground floor of a building? Are you captive to the building HOA for increasing fees? Have you modeled what appreciation looks like given the reduced claim to the underlying land?

If you're both 50/50 in each asset, why not create a partnership now, and contribute both assets to the partnership; where you will be 50/50 owners. Then the partnership can be on title as the owner of both current properties and then the partnership can be the consistent taxpayer for a clean 1031 exchange. A partnership can do 1031's indefinitely, so no issues with 1031s in the future if you go this route. 

I think you've reached a point that is common with entrepreneurs of any industry. You got your business off the ground in an awkward and unsophisticated way, because starting is hard. Now that you've had some success it is a good idea to clean up the structure of the business and continue forward on your chosen path.