1031 Exchange

[docwag]

I have a vacation home on Galveston bay. We usually use it less than 14 days per year. We occasionally will rent it out. It's great for fishing season but somewhat limits our vacation choices elsewhere because of costs related to insurance, taxes, etc. Am thinking of the possibility of selling it and doing a 1031 exchange for other investment property. Will sell in the neighborhood of $330K. I have a couple of ideas. Would like to hear yours and the reasoning behind it. Also, who to use for the 1031 exchange?
Thanks in advance.

 

[Dionysus]

I work for Stewart Title and we have a subsidiary company called Asset Preservation Inc that has been very successful with these transactions. The API web site is a good source of info. PM me if I can help put you in touch with someone.

 

[utgrad06]

I would be very careful in characterizing this as a 1031 transaction. To qualify for 1031, the property has to be held for use in a trade or business or primarily for investment. Given that you just described this as a "vacation home," it probably wouldn't qualify.

 

[unpaintedhuffhines]

why not rent it out more? You said you do it occasionally so you're already comfortable with that idea.

You can make some serious money renting out vacation homes that would offset way more than your PITI

 

[docwag]

Actually, the IRS has allowed a "safe harbor" provision for second homes to be used in a 1031 exchange provided it is used less than 14 days each year for personal use and is rented out at least 14 days each year. This became available in March 2008. See link.
I realize I can always rent it out more. Problem with that is additional wear and tear; especially with people we don't know. People we know typically take care of the house and clean up when they leave.
The Link

 

[SippeeKup]

Go with Texas1031 out of New Braunfels. They have handled in excess of $50MM in 1031 transactions for my clients. They are good, cheap and local. Forget using the large title company related 1031 companies (although be aware that the 1031 business is not regulated).

 

[docwag]

If I go with Texas1031, what cost am I looking at to do the exchange?

 

[Bernard]

How much profit are we talking about here? The fees can add up quick. Sometimes it's just better to pay the tax now. Unless you keep the replacement propertyunitl you die or keep doing 1031's until you die, the tax will eventually come due.

The timing is critical. Identifying a suitable replacement property within the given time period is the trickiest part. It's easy to find something to by, but the real opportunities sometimes take more time to uncover. You can do a reverse exchange also where you buy the replacement property first and sell your beach house later.

Bernard

 

[SippeeKup]

Most likely $750.00, but depends on dollar size.

 

[zork]

Doesn't Wulaw on this site have a title company?