If you’re in the multifamily area, you know that the market is HOT and competition is fierce. If you’re trying to do a 1031 exchange, it may be advantageous for you to lock up a replacement property so you know you’ve got a sure thing to exchange into.
You don’t want to be playing musical chairs, and at the end of your 45 day identification period have no chairs to land on. With that in mind, here are your options:
- Tie up the replacement property with a patient seller who will let you hold the property on the shelf so that once you sell your relinquished property you’ve got something under contract to roll into; or
- If the seller is impatient, and you have to close first on the replacement property, then do a reverse 1031 exchange. Have the qualified intermediary form an LLC to acquire the replacement property and hold it for you for up to 180 days so that you’ve got a sure thing waiting for you to exchange into.
Now paying for the property without the proceeds of the sale of your relinquished property can be a trick. That’s where working with your lender and having your cash lined up will make you the most competitive and capable purchaser to lock down a replacement property.