All Forum Posts by: Michael Skoczylas

Hi Shawn- Unfortunately, currently, 1031s can only be used to exchange real property for real property (investment properties). 

Improvement exchanges are usually more costly. My guess is somewhere between $5k and $10k. My former employer was squarely in the middle of those two amounts. The risk being significantly greater for an improvement exchange than a standard exchange. 

absolutely not true. You must have misunderstood him. If not, then he has no idea what the rules are for 1031s. Might want to find a new accountant if you indeed are completing a 1031 because they are not that easy to report either. 

@Moran Eldar once you have access to the funds the 1031 is ruined. Putting that money in the account which you have access to is a no-no. There are lots of qualified intermediaries on here - and the price is actually VERY cheap. Reach out to one of them. They can help. 

Technically you can. For liability purposes I would recommend opening a new disregarded LLC. You don't want a liability from one property to hurt this other property. In most states its a pretty minor fee to open and to maintain.

I think you got some great responses here already. 

1. I think you need to clarify how this is owned, AND how this has been reported for tax purposes. 

2. Type of property- investment, personal, vacation.

3. Talk to your accountant who likely knows the tax situation better than most, and possibly have him reach out to a specialist. 

4. Decide if you for sure want to sell, or if a cash out refi can satisfy the current needs. 

I would say anything should be on the table - including installment sales, 1031's no matter how you feel the market is, there are good deals out there.

I have found that finding a good deal is only a quarter of the battle. Having the right partners/contractors is even more important. People over deals. A bad deal can be salvaged by good people, and bad people can wreck a good deal. So if you found someone in AZ that works for you and does an awesome job, keep going back to that PM! Share the name too!

The linchpin here would be if he could prove that the property was investment property. If he can't a 1031 is not possible. 

I do think you have some great options though. Rent it out now to give him some income, and then if he decides to switch into MFH he can then 1031 (since he used it for investment purposes) at that time. He can also rent it out now until death, then his heirs can decide if they want to continue renting it or sell it - and since they get a step up in basis they would pay no tax. 

Overall its a good situation to be in, and he is lucky that you are thinking about this already.  

These guys nailed it. A 1031 is only for a sale and purchase. A cash out refinance will in most cases be a tax-free transaction. Go buy those properties on the cash out refinance- then 1031 them when you are ready to sell!

@Sai Kopacek If I understand you correctly - you would like to transfer your current rental to an LLC and then 1031 it.

If the LLC is a single member LLC it will likely be considered a disregarded entity for tax purposes- which means for 1031 purposes you are still the Exchanger. If you transfer to an LLC then 1031 right away some practitioners might shy away from that because some states may say that the LLC did not hold for investment purposes (Personally, this would not bother me). But if you either exchange as an individual, then buy your replacement property in a single member LLC for 1031 purposes it is the same. Also, if you transfer the property to the LLC now and then exchange down the road no one should have an issue with that.

If I misunderstood any of your intentions please let me know so I can update.