Anyone ever done a 1031 exchange?

[brewer12345]

My father-in law has a house that he moved out of 11 years ago and has since kept as a rental. He is close to retiring (at 65) and does not want to manage the property anymore. Over the holidays, I casually mentioned that he should look into a 1031 exchange if he didn't want to move back into the house for a couple of years and get a primary residence exception. Now he has indicated interest in doing this. I know that an exchanger needs a qualified custodian and the new asset must be real estate of some sort. I was thinking tat a triple net lease or an interest in a real estate partnership would be ideal, as it would simply throw off income without my FIL having to be actively involved. Does anyone have practical experience or advice?

 

[P.S.]

My parents have done this several times. What's your question?

 

[Mr._johngalt]

My parents have done this several times. What's your question?

I've done one or 2. Lots of creative possibilities. Tough to put them together though.

JG

 

[brewer12345]

How hard is it to do this? Is a tenant-in-common or triple net lease tough to find? Any idea of how much income (%) these things throw off? Considering that he has little interest in managing property, is he better off just paying the taxes and selling outright?

 

[P.S.]

I'll ask them and get back to you.

 

[saluki9]

How hard is it to do this? Is a tenant-in-common or triple net lease tough to find? Any idea of how much income (%) these things throw off? Considering that he has little interest in managing property, is he better off just paying the taxes and selling outright?

There are two companies I know of who do this. One is AEI and another is Dividend Capital. Basically they do the exchange into a RE LP. You wind up with an interest in several properties. I think you wind up somewhere around 7-8% in the yield dept.

 

[Beachbumz]

Hi Brewer!
A typical 1031 exchange is not hard at all. This is where they would sell the property. The proceeds go to a third party intermediary. They then have 45 days to NAME the property(s) they wish to buy and 180 days from the sell to close on the new property. I have done this, it's no problem.

There are several companies out handling NNN properties, including TIC props, just do a google and you will get plenty of links. I have a friend that purchased a NNN property not long ago, the biggest problem he had was finding a suitable property that was not already under contract by the time he got to it. The good ones apparently go pretty fast. The yield will be in the 6.5% to 8% range. You also need to check the rent increases. Some go with CPI, some have none at all, others some variation. The leases usually run 20 years or so with some 5 year options. This sounds like a pretty good option for your FIL.

My friends check is direct deposited every month, and he has zero responsibilities, a pretty good situation.

Beachbumz 8)

 

[brewer12345]

Thanks for the replies so far. It looks like the amount he has to invest would be enough for a tenant in common deal, not enough for a NNN lease. Anyone have thoughts on going into a new deal vs. trying to buy a seasoned deal? Any specific sugggestions on brokers (firm names)?

 

[P.S.]

How hard is it to do this?  Is a tenant-in-common or triple net lease tough to find?  Any idea of how much income (%) these things throw off?  Considering that he has little interest in managing property, is he better off just paying the taxes and selling outright?

Brewer, asked my mom...she said it's easy to do, just have to find the right properties.  Re: tenant in common triple net lease, they haven't done those.  % of income, she said depends on what your tax bracket is, and the same with the last question.  She said key is to find a good company or escrow agent.  Also, easier if you find your 2nd investment if possible before selling 1st, for ease in timing exchange.  Don't know if this was any helpful .

 

[brewer12345]

Thanks. Actually, I suggested that my FIL check what the cap gains taxes would be and consider paying up now. That way he wouldn't have to be locked into an illiquid TIC just to get some yield, since he does not want to manage a property.

 

[Martha]

I am squeemish about the tenant in common (TIC) arrangements because of the potential for unlimited liability and the difficulty in exiting the investment.