We continue our discussion of timing with the importance of timing in a 1031 exchange.
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: We’ve been talking about the timing of transactions. When you know you could put your property up for sale, when should you put it up to optimize the opportunity. Well, there is the element of the 1031 exchange, and that’s a tax deferral business of investment to investment property purchase and sales that you do, Bob. There’s a lot of strategy in the timing, isn’t there?
Bob Nelson: Oh, there’s huge, absolutely huge. When you have decided that you would rather own a property different from the one that you currently own but you don’t want to pay the capital gains tax either to the state or to the federal government, you’re talking most likely attached deferred exchange. And I need to know that several months before we actually go out and do our magic.
There’s a certain amount of strategy that’s involved. We need to identify what you’re after, as far as the financial goal of the transaction, and how likely it is that we’re going to be able to find a property that produces that sort of thing.I start shopping for the up-leg or the replacement property at the same time that I’m starting to market the down-leg, or the property you’re going to get rid of in the exchange.
Marcia Edwards: There are some pretty definitive deadlines, aren’t there, Bob, in the process? Where you need to make decisions within a timeframe, or the IRS will be very unforgiving.
Bob Nelson: Yes, absolutely. And if we don’t do the prior counseling and so forth, it’s going to become so rushed, you’re not going to appreciate the opportunity that you have.
Marcia Edwards: So you can’t start too soon or too early in regards to a 1031 exchange, and understanding your likelihood of success at the back end of that upon the completion of the exchange. Will you have put yourself in a better position? Realistically, can you put yourself in another, better position that’s right sized? Or will you be losing ground because you didn’t have a plan that was realistic?
Bob Nelson: Exactly. It’s going to cost you money in the long run, and it will you feel very uncomfortable as you make the transaction as attached deferred exchange. Doesn’t have to be that way, it’s so easy to plan this thing to reduce the stress and increase your opportunity of success. It just simply is a process of timing, literally, timing.
Marcia Edwards: It is so wise to have counsel next to you who has done before, so track down Bob Nelson, help him understand what you’re seeking to do. He will not waste your time or his, but he will have a good conversation to help be realistic in your expectations.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30 on KPNW for the “Real Estate Today” radio show.