Early in their working careers two brothers invested in a small Ballard six-unit building. Their families were young and the income was acceptable. Over time and with aging, the building was becoming physically and functionally obsolete. The brothers had retired and were faced with the opportunity of having to spend substantial money to upgrade the property and increase income. They were netting about $32,000 annually. We suggested that they consider a sale and find a single tenant retail building to increase their income.
A 1031 Exchange has very strict rules and timelines. The Seller is required to identify up to three properties. The properties have to be identified within the first forty five days and the sale must close on one or all identified property within 180 days from the date of sale. There is another device which can be used. It is called a Reverse LLC. In this case the client was introduced to a Qualified Intermediary (the ultimate owner must never be in control of the cash until all of the exchange is perfected). The client bought a 7-11 leased property and then proceeded to sell the six-plex. The exchange was perfected using the proceeds of the sale and ultimately title was taken from the Facilitator to the brothers.
The bottom line was to increase their income to approximately $76,000 per year.
