(As reported by real estate educator Duane Gomer, http://duanegomer.com)
So many times I give information and then I do not follow it myself. There is something that I think Duane and DJ Gomer and other rental owners should consider. Simple basic 1031 Exchange. And real estate agents should be telling their clients some of the benefits of exchanging in this market.
There are so many fancy terms in Exchange work. Like for Like, Napkin Test, Boot, TIC Exchange, Reverse Exchange, Construction Exchange, Mortgage Relief, Designate, Intermediaries, Safe Harbors, 45-180, Conversion to Rental of a Home, Basis After Exchange, and so forth.
Today, just the facts and keeping it basic. Many rental owners brought single family investments during the down time. If an owner purchased around 2008 to 2011, chances are that there would be some good equity in the rental. Some of you fit the description.
You have considerable money equity in a rental. Why not trade the rental for two or three rentals or for a much higher priced rental? More leverage, more potential for growth, larger portfolio, more appreciation, more depreciation, etc. etc. etc.
You should sell your property first and do a regular exchange. Reverse exchanges are difficult, expensive and esoteric. You sell and the money remains with an accommodator. You have 45 days to select your trade-up properties and 180 days to complete the transactions.
Therefore, you must get Lender-Approved before even thinking about this. Then start researching where you will be going so you are ready to move when your property is listed for sale and an offer appears. It is extremely important that a potential exchanger find an agent (who knows exchanges as not all do) an accountant, attorney and accommodator and be ready to go.
Real estate agents: Think it over. You have people who should consider exchanging. If you can convince someone of the great benefits, you should get a listing and two possible sales. MLO’s that looks like two new loans to me. Escrow officers that looks like three escrows, etc. etc.
See you at the closings.
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