I’m getting a little bit closer to doing my first commercial deal. If I do this, I will be listing a house to sell to 1031 into this property. What are the dos and don’ts of doing this? Also, I am assuming if I list the house for sale with a realtor, their commission is paid out of the closing and is listed on the settlement statement. Then what gets exchanged into the new property is just the net proceeds from closing?

Don't know but would imagine.

The 1031 savings I have found has largely been from not having to pay that depreciation recapture on my buy and hold places.

There are financial calculators online that can give you the specific amount of savings you have by doing the 1031.

In the perfect playbook in doing a 1031, I first try and tie up a property that I want to buy. I purchase an option on the place and file a memorandum of option against the title - clouding up the title so my seller can't try and backdoor me.

With a replacement property in your chain, I line up a property that makes sense to peel away. Sometimes it is based on owning it for longer than 20 years, other times it is that house that just seems to have a turn over every two or three years instead of a long term person. So I give myself an early Christmas gift and sell it.

Beyond that you will be needing to ID the middle person. There are specific rules on who can and can't be that FI. great questions to ask is scope of knowledge, insurance and expenses - especially those hidden fees. Some companies will charge you only $800 but then charge you a mandatory $75 wire fee for each part of the transaction (wire coming in, wire going out, second fee for a second property). another area of fee schedule padding is charging more for buying or selling extra properties. There should be a small fee of an extra $100 or 200 if you sell two places and buy one. Some places will charge you an extra $500. Before you know it that $800 exchange is $1,500.

I have used 1031 Corp routinely because they are a Pa based company with offices on the west coast for national exposure. I am in four states at this point so that helps as I grow. Their attorney comes for free and they can teach you how to exchange unexchangeable properties like vacation rentals. I know of API, they are a larger reputable company as well.

2 things I learned when I 1031 a hood duplex for raw water front land.....

"like kind exchange" is very loose. My CPA thought this 1031 would be challenged .... it wasn't.

You can walk with some cash if the purchase is less than the property you sell.

NE,

Some quick notes:

APIexchange.com has good educational materials.

The RELINQUISHED (sold) property must be in your name or you must be the end tax payer such as the beneficiary.

Call API and talk thru the proposed deal. 1031Exchange is also good. Real people who can answer your questions over the phone.

You must have owned it 366 days minimum.

NEVER touch any of the money. Title companies sometimes give YOU a check. NO!

The AMOUNT is the sales price minus professional fees such as commissions and closing costs. Your mortgage payoff and property taxes DO NOT COUNT.

So if you have $40k mortgage balance and $2000 prop taxes to bring up to date (our taxes are paid in arrears) those are "boot" Taxable income - profit you will take out of the sale proceeds to pay off those bills.

The 45 day deadline to ID the REPLACEMENT property and 180 days to close are hard dates. No gimmies. Make certain you know if it falls on a weekend or holiday because the IRS does not care.

I like to have the purchase property lined up and ready to close before selling my prop - a simultaneous close before day 45. That's one reason DST are super handy.

If you are thinking DST understand they come and go so study the offerings now to be ready to jump when you sell.

The DST "closing" is a bunch of online forms to sign online - no title company or closing table.

Make sure your internet is good - our POWER went out the day I needed to sign those docs! Harbor Freight $99 generator to the rescue!

BRAD