Is there a limit on how many properties you can purchase using one 1031 exchange? I am looking at selling some farmland and was thinking of using a 1031 to buy up multiple SFRs, 10-20. I have gone to some of the 1031 intermediary websites and haven’t found my answer, yet.
Up to three properties of unlimited value may be identified as replacement properties. If more than three properties are identified, there is a 200% rule that says the total value of all the replacement properties may not exceed 200% of the value of the relinquished property.
you can do as many properties as you want, however, if you exceed 200% of the value, then must to close on 95% of the value of the properties you identify. This is very tricky as if one or two deals goes belly-up after the 45 days identification period, the whole exchange is blown.
I just did an echange where I sold one property for $400k and exchanged for 6 properties for $1.1M. I closed my 6th property one day after the end of the identifcation period.
If you attempt this kind of thing, you really need to try and get all your properties to close prior to the 45th day after the sale of your relinguished property. The way to do this is get properties under contract before you sell you 1st property.
It is majorly stressful transaction given the time limits; doing 10-20 properties would be almost impossible if each one was a different owners (mine was 6 properties from 3 different owners; made it easier).
I had a phone conversation with a 1031 exchange rep. He said keep the identification under 200% and use the time my property is in excrow to start locating properties. Said the number of purchases didn’t matter, just be under 200% within the 45 days. He says I can close on them one at a time through the 180 day period. $700 for the first transaction and $200 for each one after that. Forgot to ask him about closing cost, are they taken from the exchange money? It will probably be at least 3 or 4 months at the soonest before this deal gets going. Gives me plenty of time to ask questions and plan.
Exchange funds can be used for most of the items that are generally called closing costs. Some items that are paid at closing can not be paid for with exchange funds, without triggering cash boot.
These are your prepaid escrows (hazard insurance, property taxes), interim interest for your financing, and prorated HOA or COA fees.