1031 Exchange Tips for Competing for Replacement Property

Replacement Property Competition

What if you're punching above your weight class on the purchase of your replacement property in a 1031 exchange? In other words, what if you're acquiring a replacement property that's much bigger than you can afford on your own. Can you bring in partners to help purchase the property?

Partnership Interest

If you're doing a 1031 exchange you want to avoid acquiring the replacement property in a partnership because partnership interests are excluded from 1031 treatment. But that doesn't mean that you can't bring in other co-owners or purchasers with you that will acquire the property as tenants-in-common.

Tenancy-in-Common

One of the facets of a tenancy-in-common is that each purchaser will receive a proportionate share of the property in portion to the amount of cash that they contribute. So if you need $10 million as the down payment on a replacement property and you're able to put up $5 million of that down payment, you'd be eligible and should be allocated an undivided 50% tenant in common interest in the property. If any other co-purchasers want to come in with you and help with the down payment, they too would receive a portion of the common interest allocated to them based on how much of the down payment they pony up.

  • 1031 Hotline: If you have questions about replacement property in a like-kind exchange, feel free to call me at 612-643-1031.

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