All Forum Posts by: Nagesh Kakarlamudi

@Shannon Smith I am looking to invest in Macon GA. Can you please fill me in as to what’s the situation now

@Dave Foster, thanks for sending this fact sheet,

Very informative. I am not trying to pick on this but this fact sheet still does not clearly spell out the rule when multiple properties are being sold. In fact I have not found any case study that applies to the most generalized exchange where multiple properties are being sold, under multiple LLCs, and are replaced by multiple properties again under multiple LLCs, as long as each LLC on the relinquished side is being given an equal to or greater value (using percentage ownership) on the replacement side as TIC or some such mechanism. All of this can be done under one 1031 exchange, which is completely legal under the 1031 laws.

This is what I found on the 45 day rule in the fact sheet: “The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary. However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient.”

In my situation since I am selling multiple properties and also held by 2 different LLCs, the clock starts ticking from the day of first property closing date. No problem there. But nowhere in the 45 day rule, it specifically says that the last property to be sold should be within the 45 days. Looks like it is subject to interpretation. Can someone then interpret that the last relinquished property needs to close anytime before the (last) replacement property is closed upon. Once again my intention is only shine the light on this part of the rule and see if there is a better understanding of the statute

@Bill Brandt, I share the same understanding with you. But some of the QIs I am working with think that 45 days applies not only to identify replacement property but also close on all relinquished properties and get all funds in escrow. If someone can site the IRS rule on this it will be quite helpful

@Ashish Acharya, the selling LLCs will end up with 70% share in the TIC, and co-buyer share will be down to 30%. Hope that clarifies

@Dave Foster thanks for all your input. Appreciate it a lot.

I am selling 4 small properties and buying a single multi family and using 1031 exchange. The total funds from sale of relinquished properties combined is approximately $400k and purchase price of the replacement is $1.0M. All relinquished properties are grouped under 2 LLCs (they are not disregarded entities), so they will have ownership in the replacement property as Tenants in Common(TIC). I am planning to structure it so that the selling LLCs will have a total of 40% of purchase price, which will cover the total sale amount. I'll be adding a co-buyer entity to the TIC for the remaining 60%. So far so good.

There are some more properties held under the two selling LLCs, i wish to sell those also but I am unable to sell them now as they are occupied by tenants. I am working towards getting them vacated and eventually sell those properties as well, I expect they will clear another $300k. I am going to start another 1031 exchange for this transaction. Now, the question is, can I redo the Tenants in Common composition done before, to add 30% to the selling LLCs and reduce that from the co-buyer entity? Or should I just delay the closing of the relinquished property and do it all at once, main problem there is that I may not be able to sell all of them within the 45 days. I know the cleanest option will be to find another replacement property that’s worth $300k or more, but I am in the mode to consolidate my properties. Any feedback is appreciated, thank for reading so far.

@Nagesh Kakarlamudi

Dave, can I convert the LLCs into single member and thereby making them disregarded. Can this be done after the sale of properties

@Dave Foster

Yes, they are regarded. Although the only other member is my wife.

Thanks for your reply.

We are in the process of selling 5 SF properties in VA and acquiring 1 MF in FL. The VA properties are held in two separate LLCs, 3 in one and 2 in the other. The purchase price of the MF in Florida is much higher than the proceeds from all 5 VA properties combined.

For the 1031 to work, I am told that the 2 LLCs be Tenants in Common in the FL property using the appropriate ownership percentages. Will this approach work?

We also wish to add a third LLC in the TIC which will be responsible for a loan for the FL property, actually it will be serving the seller financing. Hope all this makes sense, things we do to defer taxes!

@Tab Teehee

Hi Tab, great accomplishment! To get it done at 21K per unit is awesome, I saw the before and after pics. Hope you didn’t have to overhaul the plumbing lines and parking lots etc. ultimately doing it yourself makes a lot of sense, at least the first time around. Next time you can do better in terms of using GC.

I sold my 42 unit MF last year after doing something similar, in Hampton VA. When I bought it is was 75% occupied with some delinquency. Rehabbing was a challenge since we had to work on empty units first and then coax tenants to move to the rehabbed ones.

Lessons that I learnt:

Should have done a thorough inspection of all units and common areas to get a good estimate of rehab budget.

Having an on-site maintenance man helps when there are a lot of service calls. Also keeping some building supplies handy, maybe in storage, helps reducing maintenance costs.

Need a savvy and committed property manager who can fill empty units and keep tenants happy. Take your time selecting one.