All Forum Posts by: Lauren Speidel

@Ricardo Haro I have some. I will message you their contact info. 

@Ashar Ahmed @Sung Park An attorney can act as a Qualified Intermediary but if that attorney has provided legal advice to you within the previous two years, the attorney is a disqualified person and should not act as your Qualified Intermediary. Same goes for a CPA, if they have provided tax advice to you over the past two years they also are considered a disqualified person. They are disqualified because they are considered an agent of the taxpayer. An exchange can be jeopardized if a disqualified person handles exchange funds at closing.

@Ara Abrahamian @Jaysen Medhurst Yes, you can sell one property and buy multiple replacements. The number of properties doesn't matter but you must identify your replacement properties within 45 calendar days after closing on your relinquished and then you have another 135 calendar days to close on something you've identified. You also must reinvest all of your equity and debt value into the new properties. 

@John Warren Thanks so much for the mention!

@Hugh Wagner The most recent purchase date of April 2019 is what's important, not the date in 2010. For example, if you bought this replacement last month and are now selling, that could cause an issue because you didn't hold the property for long after the sale. With that being said, the IRS does not provide any guidance on how long you should hold an asset before you sell and complete another 1031 Exchange. What matters most is your intent. Did you have the intent to hold the replacement property for rental income, appreciation or use in a trade or business? Most 1031 Exchange experts will recommend holding your replacement property for 12-24 months to prove your intent. If your CPA is giving his/her blessing for this transaction, that also is important and it sounds like he/she is. 

@Sung Park When I speak with potential clients, I always recommend that they discuss their 1031 Exchange with their tax advisor first to make sure it makes sense to complete a 1031. The next step would be to speak with a Qualified Intermediary (aka QI). They can walk you through all the rules and requirements for a successful 1031 Exchange. Keep in mind that our industry is completely unregulated which means anyone can be a QI and of course there have been issues with people mishandling funds and giving wrong advice. I would confirm they are a reputable company that is insured and bonded and that they hold your funds in a Qualified Trust or Qualified Escrow Account. Let me know if you'd like to discuss further.

@John Warren Thank you for the mention! @Eudith Vacio If you're considering a 1031 Exchange there are definitely some rules and requirements that you'll want to familiarize yourself with. One of the biggest concerns for people completing 1031 Exchanges are the time frames as you have 45 calendar days to identify possible replacements and another 135 calendar days to close for a total of 180 calendar days. 

@John Warren Thanks for the mention!

@Lawrence Paul Section 1031 doesn't state that you must hold or season your property for any specific amount of time. Although most 1031 Exchange experts will recommend holding your property for at least 12-24 months to prove your intent to hold as rental income will be reported on at least two tax years. With that being said, things change and we've had some people hold for much less time but they have a good financial reason to sell. What's extremely important is that you can prove you had the intent to hold the property for rental income, appreciation, or use in a trade or business. If you are buying properties, improving them, and selling them then you probably don't qualify for Exchange treatment as your intent really is to sell the property. The fact that you are showing rental income on multiple tax returns for these properties will help in proving you had the intent to hold. Let me know if you have other questions!

@John Warren - Thanks for the mention.

@Jennifer Stanovich - In regards to using an exchange property for personal use, it is often frowned upon by the IRS. You should have the intent to hold the replacement property for rental use, appreciation, or use in a trade or business. If you are planning on living in a portion of it, then you should not use your exchange funds for the primary portion of the asset.

It is recommended that before you engage in a Reverse Exchange that you, your CPA, your lender, contractor, anyone that is assisting you with the 1031, including your QI, have a phone call to discuss the transaction. That way if any arm of the transaction has questions or concerns, the QI can address them at that time. With that being said, yes you can use out of pocket funds to fund the purchase and improvements. Of course you can take a home equity line out on your current property and pay it back with the funds from the sale of your relinquished. Those funds would be looked at as out of pocket funds. If you don't have the out of pocket funds, I would recommend reaching out to a hard money lender or local bank. The larger banks like Chase and Wells Fargo don't service their own loans so engaging in a transaction like this doesn't fit well with their structure. 

@Jared Friedman I would speak to your financial advisor about Delaware Statutory Trusts (DST) or Syndicated Tenant in Common property interests (TIC). They are extremely passive investments but are like-kind to real estate so you could complete a 1031 Exchange and reinvest into one of these structures. There are some differences between the two, for example with a DST you can have an unlimited amount of investors while with a TIC you are only able to have 35. Both are very illiquid and I would expect a hold time of 5-10 years as there is no secondary market for these investments. With a DST the investor has no voting rights and the real estate sponsor decides when to liquidate the portfolio or properties within the portfolio. With a TIC, all investors have voting rights which can be beneficial for some and not for others. There are other differences that you should be aware of but you also must be an accredited investor with a million dollar net worth not including your primary residence. Let me know if you'd like to discuss these further. I worked for the largest Nationwide DST and TIC sponsor for 10 years before moving over to the Qualified Intermediary side.