All Forum Posts by: Thomas Lam

Hi Thomas @John Thedford is right that you should call around. I use an intermediary that gets nothing unless the 1031 is completed. Getting my money back is a matter of signing a notice of termination and waiting the 3-5 business days to get my money.

Since you seem new at this I will share a huge mistake I made with my first 1031. I had held the property for over 14 years so had been depreciating the asset for all that time. I had both a CPA at the time and the 1031 intermediary and both were aware that I was doing the 1031 but neither pointed out to me that my capital gains for the purpose of the 1031 (and for determining debt to value ratios on your replacement property) will include the obvious capital gains (i.e., you bought the property for $100,000 and sold it for $200,000 so $100,000 capital gain right?) but also you have to add back in the amount that you depreciated as well so if you have held the property a long time like I did this can be quite a bit. In my case what I thought was a $100,000 gain was in fact (for tax purposes) a $180,000 gain. Unfortunately, my replacement property was based on the $100,000 gain and the remaining $80,000 was treated by the IRS as if I had received it in cash at the closing of the relinquished property. Ouch! The added bummer was that I bought other properties during the time frame for the 1031 and had I understood the above, I would have gladly rolled that recapture amount into a new property.

Another thing to consider if you are worried about the time frame to identify and find the new property is to see if your buyer will work with you to delay closing. Of course, that has its own risks but if the deal is good and you aren't worried they will close maybe you could put it out an extra 30 days or so to give you a little more time and then start looking immediately.

Finally, I'm sure you know this but the intermediary must be involved before and at the closing on the relinquished property as the proceeds from the sale cannot "flow through" you or your bank accounts for even a nanno-second...

Good Luck!

Lots of good info here.

Fortunately, I've only depreciated the house for 3 years at about $3k per year or a total of $9k. So, 25% is $2,250 which is not nearly as bad as it could have been such as in your case. Ouch.

I'll have to work with the dates on the contract if I end up going this route. Thanks for the info!

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Originally posted by @John Thedford:

The few I am familiar with charge under 1K. As far as your time to complete the exchange here is something to consider: if you list your property, set a closing date as far out as reasonably possible once you have it under contract. Those extra weeks will give you more time to find properties and make offers. If you find one you wish to make an offer on, time your closing to occur after yours sells.

Thanks John.

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Originally posted by @Rob Beland:

@Thomas Lamthe fee for the QI is the least of your worries if you miss a deadline with a 1031 exchange. The bigger risk is that you are now going to have to pay the capital gains tax you were hoping to defer. In my area QIs typically charge around $1500-$2000 to do an exchange. To answer your question, I would say yes, you will still have to pay the fee to the QI.

Thanks for the info Rob.

I do want to reinvest and avoid paying capital gains, however, I would rather pay the gains tax then end up stuck with a bad deal that I jumped on too fast because time was running out.

I have my doubts when it comes to finding exactly what I'm looking for during the short period of time that I have. Because of this doubt, I'm debating whether or not to go for the exchange.

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Originally posted by @John Thedford:

If you can't complete a 1031 timely your taxes will be calculated per IRS regs depending on your situation. As far as what an intermediary might charge you need to check around and see what their fees would be if you failed to 1031. Call 3-5 different QE and find out their terms. Also, it would not hurt to check their ratings or references. Good luck.

Thanks John. I'm going to try to get a couple references before moving forward.

Anybody have a ballpark? Are we talking a few hundred dollars or $1k plus?

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I'm looking at doing a 1031 exchange on a property that I'm selling on a short notice due to an unexpected offer.

I nervous about finding the "perfect" investment replacement with only a few weeks to identify the property.

From my understanding, a qualified intermediary puts the funds in escrow and then ensures that it's done correctly.

Let's say I go this route and I don't find the a property that I'm interested in during the specified time period. I would imagine that the intermediary would simply cut me the check and then I would pay capital gains on the earnings? Is it easy to access my money if I have an issue going through with the exchange? Would intermediary charge me if the deal doesn't go through? If so, about how much am I looking at?

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A few years ago I purchased an investment property in another state. Although not listed for sale, I recently received an unexpected offer which was enough to motivate me to sell.

Now that the contract is about to be signed, I'm scrambling to figure out how to reinvest my gains to avoid paying capital gains tax.

I've been reading up on the 1031 exchange and this sounds like something that I'm interested in, however, the rules are very specific and there are time constraints. I feel as if I may end up being "rushed" into purchasing a bad investment for the sake of avoiding paying capital gains tax.

From what I'm reading, most who are doing a 1031 already have another property in mind, which I do not at this time.

So here's my issue. I'm going to have a fairly large sum of cash (to me) that I want to reinvest in a multiplex where I currently live with hopes of finding a property that will offer a similar return to my current property. This is going to take time.

I'm new to investing in the area that I'm in and have no agent. I have to deal with selling the other property while hoping to find the ideal property in my area that meets my criteria.

If I'm understand correctly, I have 45 days after the close of my current property to identify my next investment. My closing is going to be somewhere around Sep 1, meaning that I have a limited amount of time to find a "good" agent and find the property that I'm looking for.

Is the 1031 really the best option for me? Are there any other options that will allow me to take my time finding the perfect property?

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All Forum Posts by: Thomas Lam

Thomas Lam has started 2 posts and replied 7 times.

Post: Is a 1031 exchange right for me?

Post: Qualified Intermediary - What happens if 1031 doesn't go through?

Post: Qualified Intermediary - What happens if 1031 doesn't go through?

Post: Qualified Intermediary - What happens if 1031 doesn't go through?

Post: Qualified Intermediary - What happens if 1031 doesn't go through?

Post: Qualified Intermediary - What happens if 1031 doesn't go through?

Post: Is a 1031 exchange right for me?