Is it worth doing a 1031 on small exchanges...?

I’m selling a property for $25,000; is it worth doing a 1031 on something this small?

Depends on the situation. The lowest exchange I can remember us doing was an $18,000 parcel. Just eighteen thousand! But some situations do call for it.

A few years ago, our client Jim was selling a piece of land for $18,000. He talked to us about doing an exchange but wasn’t sure he wanted to mess with it. The only replacement property he could find was a small piece of land for $30,000. It seemed like small potatoes to Jim, and not worth the hassle, so he stalled. THEN Jim discovered that a big developer was quietly buying up the surrounding properties, and he got excited. So we worked through the night to close on the property within 24 hours. (And you thought we were kidding when we say our consultants are available 24/7!)

Jim acquired the property, sat on it, and then sold it to the developer a year later for $240,000. The capital gains he saved ALONE was more than the original purchase price! Go ahead: do the math.

So don't be embarrassed if the price seems too low. Buying low, selling high; isn't that the goal of real estate investing?

--The Experts

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