I am wanting to sell a few rentals to purchase an apartment complex. Is it possible to use a 1031 tax exchange ? If not…is there a way to avoid capital gains? My new loan is 75% with 25% down I am shopping for a loan at 8% 15 year- amoratized for 30 yrs.
I need to sell smaller units to get $$$ for down payment. What is the most cost effective way to do this? Is there a way to avoid paying capital gains?
I have always done cash out refi to purchase more investments, I have never sold my investments. I need advice. thanks
Yes you can do it. Search Google and find a 1031 exchange agent that you like, It can be done for $400 in fees with one property being sold and replaced with another. Multiple properties will cost more.
Once you close the sale and the exchanger holds all the proceeds you have 45 days to pick another property and a total of 180 days to close. Start looking before the closing. You can identify more than one property under certain rules and then just close on one.
Keep in mind you have to trade at least even both debt and equity or you could be taxed on part of the gain. I learned a lot from just reading the web sites of several exchangers.
The debt and equity requirement you cite only applies to direct exchanges where no qualified intermediary is needed. You and I agree to swap our properties and we each assume the other’s debt burden on the property, is a direct exchange or a simultaneous exchange.
In a forward exchange, often called a delayed exchange, there is no requirement to trade equal or up in both debt and equity.
Instead, the contraint for a completely tax deferred exchange is the value of the replacement property must equal or exceed the value of the relinquished property and ALL of the exchange proceeds must be reinvested in the replacement property acquisition. There is no requirement to use any amount of debt to complete the acquisition of the replacement property. You could pay all cash at settlement and own the replacement property free and clear without compromising the exchange.
Thanks for the correction Dave. I hope I did not misinform anyone. It can be confusing and I would take advice from some pros before trying one of these 1031 deals. There would be noting worse than spending the time and money and then be told that you were off a day and not receive the benefits.