All Forum Posts by: Sean Ross

@Robert Ogez 1031 exchange fees range of course, but industry standards are around $900-1200 for an exchange.  Compared to the tax liability that most investors face this is remarkably low.  You also usually will not pay additional fees for exchanging between states or for trading out of SF and into MF. 

@Amanda Davi I will raise one small flag -- if you 1031 out of California and into another state, the California Franchise Tax Board will make you file an annual form wherein you report on the replacement property you purchase and whether you still own it.  Failure to do so will result in the CFTB assuming you owe it the taxes retroactively.  It's a simple form to fill out (Form 3840) but one you should have on your radar. 

The CFTB is a breeding ground for bad tax ideas, and those ideas unfortunately tend to metastasize eastward...

@Marian Freshour can I ask a simple question?  How much tax liability would you face without a 1031?  Or I can help you figure this out on the fly.  1031 exchanges are not a panacea -- they impose limitations in more than one way -- but there is a reason they remain so popular.  The calculus is very different if you have to write the IRS a $20K check vs a $500K check. 

@Anthony Shaw yes, you can sell multiple and purchase one (or sell one and purchase multiple) or any combination you can dream up.  Partial properties included (e.g. buying 33% of a property or selling 50%)

What matters are the following:

• everything you purchase is, when summed, worth at least as much as what you sold.
• all of your net sale proceeds are escrowed and used as down payment on the purchases.
• you identify all of your potential replacement property purchases within 45 days of your sale. (If you ID more than 3 properties, rules change and get more difficult)

Does this answer your question?

@Ralph Pombo that really sucks to hear!   Bigger Pockets is a good place to vent.  A lot of us have experiences with Title Companies that dropped the ball once or twice. 

May I ask what mistake was made that compromised your 1031?

@Ishmael Johnson let me separate at tackle those questions independently:

1. Yes, run the like any other potential deal. 
2. Can you elaborate on your purchase and renovation question? Your sale proceeds in a 1031 exchange are used as a down payment when you go to buy a replacement property. 
3. There is not set "best" way to do this as an investor. If you need the leverage to purchase a better property or get a better return, then it makes sense to use financing. If you don't want the debt or if financing is too expensive or difficult, use your proceeds. Remember that if you pay off any debt in a 1031 sale, then you need either new debt or outside cash to make up the difference when you buy. 
4. Yes, you can use different agents for your different transactions. 

I hope this helps, Ishmael. 

From a tax code standpoint @Ishmael Johnson there is no difference on using traditional or hard financing. What matters is that you follow the basic 1031 rules:

• replace the full value of the property you sell
• move all equity into the replacement property
• keep the same taxpayer on title
• ID within 45 days of sale and complete all purchases within 180 days of sale

Hope that helps,

@ Ramrio Rodriguez

Yes, you can purchase a new construction build.  As @Bill Exeter mentioned timing is key. 

If you need access to the sale proceeds to finance the new build, however, that's a very different ballgame. The rules (and likely costs) change dramatically. 

@Ted Swagerty let me back up what Julio is recommending. A 1031 exchange or 721 exchange could be the ticket.  

However, holding real estate in a multi-member LLC creates a lot of potential inflexibility with future transactions. TIC is a better structure from this standpoint.

@Cody L. this is a common complaint.  You need a 3rd party to create legal distance between you and the sale/purchase transactions in a 1031 exchange. This allows you to be distanced also from the consequence of a normal sale (receipt of taxable income or gains).

In a technical sense, you are not the seller and buyer in your own 1031 exchange.

As has been mentioned, any national intermediary will be able to help you, regardless of where their office is located. 

Hope this helps. 

@Rob King, here are three important points:

1. Your section 121 homeowners exemption will exclude up to $250K in capital gains ($500K for joint filers).  You can only claim this exemption once every two years. 
2. If you do use the 121 exemption on a property that has been used as a rental for a period, the exclusion you receive is pro rated allocable to the years you claimed it as a primary residence. 
3. You never exclude the recaptured depreciation taxes if you sell a property that was a rental for a while, even if you are using section 121