All Forum Posts by: James Duffy

I agree that you may be able to do that, but it may not be easy. As you know, with a like-kind exchange, any sale proceeds that you do not apply to the purchase of a new investment property will be taxable (up to the total amount of gain on the property). The challenge with seller financing is that you don’t receive any (or very little) cash on the sale so even if you roll that cash over into a new property, subsequent payments received on the note will be taxable (to the extent of gain). The question is, how do you get cash to the qualified intermediary (Instead of the seller note) to buy the new property.

One approach might be to purchase the note from the qualified intermediary for cash. To take a simple example, if you sold a property for $100 with $20 cash at closing plus a note for $80, you could buy the note from the qualified intermediary for $80, leaving the QI with $100 cash to use to purchase the replacement property. (You would have tax basis in the note, equal to the amount paid for it so the receipt of subsequent payments would not be taxable except to the extent of interest received).

Coming up with cash to buy the note may, of course, be easier said than done. Do you have the cash? Will a lender be willing to make you make a loan to you for that cash?

The fact that the property you are selling is subject to existing debt, and presumably the property you buy will be purchased in part with loan proceeds complicates the analysis. On the positive side, the third-party debt would reduce the amount of the buyer note payable to you and therefore, reduce the amount of cash that you would need to come up with.

You may want to talk to a qualified intermediaries who may have done this before. Note this is not tax advice, and be sure to consult your own tax advisor because qualified intermediaries will facilitate an exchange but they are not giving tax advice or guaranteeing that an exchange is nontaxable under Section 1031.

Hi Sam,

   Try Simply Residential Property Management in Bloomington.  We have worked with them for years.  One thing I like about them is that they dont charge a month's rent as fee for new tenants.  You can message me directly if you have questions.  Good luck

Hi Raquel,

   I have used Simply Residential Property Management for SFHs - not sure if they do multi-family (or do it well).  

Also, you could try the Property Management Guys - I am pretty sure that they do SFH and smaller multifamily. I understand that they are doing a good job for another property owner that I know.

Good luck!

Great follow up Tim!  We have had this conversation before but I appreciate the reminder.

Great information everyone - what kind of fees are you seeing to close the loan and LTV? I recently was approved for one and fees include 1% broker fee, 1% lender fee and another $3k in doc prep, appraisal and title fees. Of course if I went direct to a lender, I could avoid the broker fee. Thanks!

Hi Tyler,

  A couple other groups are MNREIA (Minnesota Real Estate Investors Association) and  MN REC (the Minnesota Real Estate Club).  These are both good opportunities to meet other investors (brand new as well as experienced) and get some good training.  Hope to see you at one of their meetings!

Not off the top of my head - there may be some buildings or neighborhood near some of the more commercial areas. I would need to consider a specific location.  Sorry.

Hi Mitch,

   I have owned a couple SFH's in Richfield for about 7 years now.  I have them managed by a 3rd party.  I have not had any problems with the City at all although, I keep the properties in good condition.  The renters in these properties have been there at least 3 years maybe longer and I have not had trouble with criminal activity or malicious damage.  Their are probably a couple submarkets where I would be reluctant to buy, but I generally I like the City overall as a rental market.  Happy to talk with you further if you are interested.  

I have owned duplexes in North Minneapolis and that can be a very high maintenance tenant base, but what you are describing is next level.  I sold the duplexes after a couple years and personally won't invest in North Minneapolis anymore because of the challenges.  I'm sure it is tougher now than it was before because of the spike in crime in the last couple years.  There are some investors who do well in that area.  If you want to try to keep the property, you might try to connect with an investor who has properties in the area and get some advice or referrals to contractors the (or they may be an option for disposing of the property).  How would you find those investors?  I would try MNREIA or maybe call on some rental ads for similar properties in the area.  Best of luck

I should have asked you William, what are you excited for with multifamily real estate in 2022?