It’s a somewhat strange time in the commercial real estate marketplace. In some sectors, it’s blazing hot, while in others, it’s stagnant. In this article, we are going to talk about the state of the real estate marketplace and offer some tips for conducting 1031 exchanges.
Velocity & Fragility
Though we sometimes work on 1031 exchanges for big corporations, most of the 1031 exchanges we facilitate are for small mom and pop owners. That’s where we’re seeing the greatest velocity in the marketplace.
On the flip side of the coin, there are also some soft spots in the marketplace since the pandemic began. Entertainment venues, restaurants, hotels – etc. From a 1031 exchange perspective, we may not see a return to “normalcy” for these properties for another couple of years.
But even in hot sectors of the market, taxpayers can face some tough real estate situations. We worked with a client recently who was selling a property in Colorado and wanted to exchange into a like-kind property in Florida. The good news is that the market in Colorado is a hot seller’s market. The bad news is that the market in Florida is even hotter. So while this client had no problem selling their relinquished property, they had a difficult time finding a replacement property within the 1031 exchange timeframes.
1031 Exchange Time Limits
The day you sell your relinquished property is day zero for computing your 45 day identification period and your 180 day exchange period. Those rules were created not with investors’ success in mind. Rather, they were created to limit the number of people completing 1031 exchanges. For that reason, you really need to work with someone who understands the rules of the road before starting the process.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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