I’ve seen so many stupid transactions done by 1031 buyers. I can understand why someone would want to 1031 but the amount of groups I’ve seen sell their property at atrocious cap rates and overpay for a new property, sometimes taking on really shitty debt, amazes me. Maybe I’m looking at this the wrong way but why are people trying to 1031 in this environment where the bid ask spread is all fucked in a number of asset classes. Just seems like a lot of retards going around transacting in a bad market just to save money on taxes while they’ll probably take a bigger loss from the property
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It can make sense, but not always.
hypothetical: A high net worth operator in CA sells a 20 million dollar multifamily apartment deal and wants to 1031 into multiple absolute NNN single tenant properties because they want to have no landlord responsibilities and collect mailbox money every month. This of course, is assuming the income makes sense and they are cash deals.
Def get that and not saying that doing a 1031 is a bad tool overall, but a lot of the 1031 money I’ve been seeing in my market (Small to Medium sized MSA) has made some really questionable purchases
I mean if I’m a long term holder and don’t need the money immediately why would I not 1031 instead of losing 20% of the value creation. Especially when it’s common belief values are down right now and you can access your equity via debt down the road.
Risky debt on it = bad. Low cap rate with all cash/low leverage on decent property you’re gonna hold 10-30 years because it’s a place to park your money… I get it.
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