FAQ Series

I want to do a 1031 exchange, but I will not list my property until I find my replacement property first.

If I had a nickel every time I heard this….

I get it. Trust me I do. Since there are time limits to a 1031 exchange, it is only human to worry about

I have never come across a client who will argue the amazing benefit that a 1031 exchange can provide. Afterall, this 1954 tax code fundamentally changed the investment real estate world and is the most advantageous tax break that investment real estate can offer if utilized and planned correctly through the advisement of experienced and skilled representation. If this tax deferred exchange was never created, I may not be writing this explanation right now because this industry would be significantly smaller.

Unfortunately, too many property owners never “pull the trigger” on a 1031 exchange because they sit in waiting for the “perfect” exchange property before they will “risk” putting their property on the market for sale. Remember, for investment real estate, like multifamily, there is no “perfect” property. You are not buying a home to live in each day and raise your kids in, so there is no need for the property to be “perfect”; rather, we simply need to find a property that is better than your current property; depending on your personal investment goals, “better” can be in terms of higher cash flow, less management, better location, more units, higher quality building for future appreciation, new construction building, maximizing or minimizing leverage. So the first step in getting over the hump on committing to a 1031 exchange is letting go of the idea that there is a “perfect” exchange property out there. We simply need to find a better property than you currently have. And the good news is we are in Los Angeles, which is one of the most active markets in the country. This is how you grow.