All Forum Posts by: Mike Auerbach

Unfortunately, you cannot use the proceeds from the sale of your single-family house to purchase the remaining 50% of the LLC that you don't already own in a 1031 exchange. The IRS does not allow the exchange of real property for partnership interests, including LLC interests, under Section 1031.

However, there is a workaround: if you can structure the transaction such that you acquire 100% of the membership interests in the LLC, it can be treated as a direct purchase of the underlying real estate by you. This is supported by Rev. Rul. 99-6, which treats the acquisition of 100% of an LLC as a direct purchase of the underlying real estate for 1031 purposes.

Can some of the members of an LLC do their own exchange or cash out at the time of the sale of the property?

A drop-and-swap allows investors to drop out of their current ownership structure, break away from partners and buy a property on their own. It’s important to get a structuring attorney involved, particularly in a state like California, before you sign a Purchase & Sale Agreement.

Yep there is are also Opportunity Zones for failed 1031 transactions

The power of compounding in real estate is real - yet most professionals don't understand how powerful it really can be even though they talk about generating wealth.

The true power of a 1031 exchange is the ability for an investor to meet their investment objectives without losing equity to taxation. With more money, an investor can buy larger, multiple, or more productive properties

Don't believe me - take a look at this comparison chart:

Let’s say you do 10 transactions in your investing career. If we jump to transaction 10 in the table, which is highlighted, by exchanging each time you will have amassed $5.766MM.

If you decide not to utilize a 1031 and pay 30% taxes each time, after 10 transactions you’ll be left with a little bit over $2,000,000.

You’ll be $3.75M richer by doing a 1031 exchange.

Numbers don't lie!

#1031exchange #compounding #investmentsales #cre

@Erica Calella great addition! Have at least 1-2 backup options is essential in planning for a successful 1031 exchange

@kevin reverse works but is more expensive AND you have to be well capitalized to execute on it!

Here is one of the best 1031 hacks. Lots of people complain about the "timeline" risk.

Start looking for a replacement property during the marketing process of the property that you are selling.

The 45 day ID period only starts on the day you sell your relinquished property.

Since I'm new on this platform, I realize that many on here do the conventional "fix and flips" - those aren't eligible for 1031 exchanges. Neither are developers. You must be a US real estate investor in order to utilize the 1031 exchange. What does that mean? Generally speaking an investor collects rental income and signs a lease with a tenant whereas a flipper or developer shows "inventory held for sale" on their books and gets all of their economics derived from a SALE.

The great thing about doing a 1031 exchange is that you have infinite exchange options. There are more than 16 different types of real estate an investor can exchange in and out of. You can exchange raw land for a rental home, an apartment complex, for a shopping center. Even go from multiple SFHs and consolidate into an industrial building. The opportunities are endless and an investor can do a 1031 exchange in any city and any state in the US as long as its held for business or investment purposes. Its a great strategy the most sophisticated investors use when the market dynamics changes. So if you are looking for replacement properties, understand the opportunities are endless!

#1031exchanges #replacementproperties #capitalgains #taxes #realestateinvesting

Any taxpaying entity can do a 1031 exchange. The IRS has a “same taxpayer” requirement for tax tracking – if the same person or entity is exchanging, it’s easy.

If not, we’ll have to bring in our structuring attorney to ensure the right steps are taken to maintain 1031 eligibility.