Exchanging Multiple Properties, Part 2

The questions here were received from interested 1031 exchangers visiting my website. I have chosen to leave the questions intact with their ambiguity, shorthand writing and misspellings so as not to act on the assumption as to what when unclear the questioner meant.

Exchanging Multiple Properties, Part 2

Exchangers can bundle properties into one lot, observing the closing date of the first property closed as the beginning of an ID period.

However, other rules apply – how the properties are titled, what the timeline is plus the debt to cash ratio all need to be understood before a sale. In selling a property and buying multiple properties, or selling multiple properties to buy one property exchangers have to be able to consolidate the timeline, add up and maintain the debt to cash ratios and make certain all the entities together can do an exchange.

Question 1:
Marilee.Party A sells prop.1 to Party B for $2.4M. Party A also sells another prop. for $1.5M net. Party B owns prop. X worth $4.8M with $2.4M assumable debt. Can Party A exchange those 2 properties for prop.X -Pay down $1.5M towards the $2.4M plus cash to pay debt entire debt and qualify? Thank you

I think I understand the math – If the two sales by Party A ($3.9M) are all cash, then YES, Party A can purchase the property X worth $4.8M, use her cash to pay down the debt to $900,000 and qualify. The rules are: you cannot take any cash out of settlement. You can substitute cash for debt. You can add debt to your exchange. You need to buy equal or greater ($4.8M is greater than $3.9M). This qualifies every day.

Question 2:
Hi! I have a couple questions. I have 2 single family rentals in Denver Colorado. 1) Can I exchange the TWO of them TOGETHER for ONE rental in California (since property there is so much more expensive). 2) can the rental in California be a condo or must it also be a single family residence? Susan

Yes, you can exchange two properties for one, as long as you stay within the 1031 exchange guidelines regarding 45 day identification and 180 day settlement. The rental in California can be any kind of real property such as a Condo.

About Marilee:

With a wealth of experience in real estate and 1031 exchanges, Marilee helps people to deal with a complex real estate process. Her long experience with her own properties and having real estate broker licenses in three jurisdictions help.

Marilee likes helping clients to understand the ins and outs of a real estate deal. With her combined more than 20 years as a commercial real estate Broker plus another 20 years with FINRA licenses Marilee has the experience to help clients to plan adequately for a real estate future. Let Marilee help you with a real estate portfolio that needs a guiding strategy in terms of tax regulations and more.

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