Exchange questions and advice please - Posted by Nancy(NC)

Real Estate Investing
1

Posted by Nancy (NC) on October 15, 1998 at 09:51:59:

Bud:

Thanks for the response.

I was thinking of using this money to buy up lots
of properties with as little down as possible but
it sounds like I should only buy one or two. I
was worried about getting into something by doing
lots of exchanges.

Nancy (NC)

2

Exchange questions and advice please - Posted by Nancy(NC)

Posted by Nancy(NC) on October 13, 1998 at 19:16:17:

My husband and I are doing a 1031 tax free exchange
hopefully on some property we own. I have talked with
my CPA and took a real estate course (update for license)
in 1031 tax free exchanges so think I understand enough
but have some other questions. When the time comes, I’ll go
to atty. who does these and also consult my CPA again.
My questions are more with strategy instead of process.

We should get about $50,000. we will need to use toward
other properties. I want to buy as many as we can with
as little down as possible but am worried about the time
restraints, etc.

If we buy property to flip, can we do that or will we
have to do exchanges each time we sell something? Is
it better to buy fewer rather than more properties and
put more down? Should we use other money to do flips
that we don’t declare and just count as income?

I would welcome any advice on this post.

Thanks!
Nancy (NC)

3

Re: Exchange questions and advice please - Posted by Nancy(NC)

Posted by Nancy(NC) on October 15, 1998 at 10:21:17:

Mark and Bud:

Thanks for the responses. I am having problems
with the new board getting responses posted to each
of you so will respond here.

I answered your post, Bud, before reading the
IRS info. you suggested I read. It looks like I
should only exchange one property for one property.

How do you ever get out of an exchange? This looks
like a tax nightmare in the future when time to
finally sell and get money out of it. Would I
be better off NOT doing an exchange and selling
with owner financing or second mortage instead?

Thanks again for responses.

Nancy(NC)

4

Re: Exchange questions and advice please - Posted by Bud Branstetter

Posted by Bud Branstetter on October 14, 1998 at 11:52:08:

Check out http://www.irs.ustreas.gov/prod/forms_pubs/pubs/p5440105.htm

Generally you deal with investment property for 1031 exchanges If you continue to flip you would be considered a dealer. A dealer is not eligible for 1031 treatment.

If you exchange all of the gain into one property you then may have the ability to borrow against the property to get your cash out. A smaller amount into multiple properties may strand you equity hence your cash.

5

Re: Exchange questions and advice please - Posted by Mark (SDCA)

Posted by Mark (SDCA) on October 14, 1998 at 11:00:53:

I’m not sure what you mean by time restraints. Are you talking about the Starker delayed exchange periods of 45 days to ID the new property and 180 days to close on it? I wouldn’t worry about those too much. Just make sure you have one solid property to buy that will meet the exchange requirements. As for fewer or more properties, I would go for more. This is somewhat of a personal decision, but part of the reason I am looking to exchange is that I am looking to re-leverage. That means less down. Hope this helps,

Mark