22A — March 15 - 28, 2013 — 1031 Exchange — Mid Atlantic Real Estate Journal
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1031 E xchange
By Scott Rotkowitz, Esquire, IPX1031 1031 Exchanges a multi- property investment strategy
S
elling one property un- der a 1031 Exchange and buying a replace-
cally less aware of this fact. The ISSUE: Why don’t we see more multiple property ex-
a property. Most people have enough on their plate with one real estate transaction.
Selling a relinquished prop- erty for $500,000 and then buying a replacement property for $500,000 or more is the typ- ical way we think about 1031 exchanges. If we move beyond this one to one idea we realize that we can take advantage of multiple types of market op- portunities. For example you may be an investor that has a number of smaller rental units worth $100,000. They have been good investments but now you have an opportunity to buy a larger commercial mixed use property. It’s a good deal but how do you fund it.
Simple sell a couple of your rentals. The savvy investor will package all the proper- ties together and sell to one or two investors. The other less efficient option is to sell them individually which requires more work. The inverse, buying multi- ple properties, works the same way. The best real estate op- portunities are in foreclosures and short sale properties. You may have an office building or retail investment, with 90%+ rented, that is worth $500,000 and buyers are plentiful. In order to take advantage and buy some of these foreclosed or short sale properties you could sell that investment and buy 5 or 6 of these distressed properties. It is a harder con- cept to grasp because most investors are trying to buy up. They are not typically think- ing about selling and dividing the income into less costly assets. This method allows for numerous benefits such as diversifying into multiple properties and use of a value added strategy. We would be remiss if we did not make mention of some of the specific issues and regula- tions that surround multiple property exchange transac- tions. We will intentionally avoid an in-depth discussion of all the laws and regulations that surround 1031 transac- tions in this discussion. What is Important to this discus- sion is the 1031 identification rules. These rules define the number and value of proper- ties that can be identified for purchased in a 1031 exchange. In essence these rules limit your ability to make general and unlimited identifications (3 property, 200% and 95% exception.) Before contemplat- ing any 1031 transaction it is import to speak with your tax advisor and plan out your strategy. This planning phase is paramount when contem- plating a multiple property exchange to have a successful exchange. If done correctly multiple property exchange using 1031 can be implemented into your investment strategy creating greater rewards and oppor- tunities. Scott Rotkowitz, Esquire is assistant vice president of IPX1031 in 3705 Quak- erbridge Rd. Mercerville, NJ. n
ment prop- erty is typi- ca l l y what i s thought of when con- templat ing a 1031 real e s t a t e e x - change. Most tax advisors
If done correctly multiple property exchange using 1031 can be implemented into your investment strategy creating greater rewards and opportunities.
changes? Most likely the rea- son why advisors and inves- tors do not utilize the ability to purchase multiple properties is because they are think- ing solely in simple or linear terms, sell a property and buy
Add one or more multiple real estate transactions and things get more complicated. But, for the investor or advisor that can manage multiple transac- tions a powerful investment tool emerges.
Scott Rotkowitz
are aware on some level that multiple relinquished or re- placement properties can be sold or purchased under an exchange. Investors are typi-
S till jumping thoSe §1031 exchange hurdleS alone ?
At Investment Property Exchange Services, Inc. (IPX1031 ® ), we provide the knowledge, resources and credentials necessary to help you close the most complex tax deferred exchange transactions. Exchange funds are covered by a $100 million Fidelity Bond and a third party guarantee. IPX1031 ® is the only Qualified Intermediary with a dedicated Reverse and Build-to-Suit Exchange Division specializing in complex real and personal property reverse and improvement exchanges.
Security. $100 Million Fidelity Bond Guarantee of Funds $30 Million E&O Liability Insurance
Expertise. Attorney Regional Managers Knowledgeable Local Sales Staff Experienced Exchange Processors
Service. Regional Processing Centers Separate Reverse Exchange Division Accredited Exchange Seminars
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CALL TODAY
LOCAL PROCESSING
Mid-Atlantic Region (866) 588-1031 Scott Rotkowitz, Esq. scott.rotkowitz@ipx1031.com 3705 Quakerbridge Road • Mercerville, NJ 08619
www.ipx1031.com
Make IPX1031® your FIRST choice for §1031 Qualified Intermediary Ser vices.
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