Inherited real estate + 1031 options
Hi y'all
I recently inherited about $3.5M in equity of real estate. It is currently being sold as we speak and I now have to figure out where to place the capital via 1031 exchange.
I am looking at NNN industrial sites in infill markets. I am consulting with professionals but wanted to see if anyone on here had any creative ideas.
The 1031 window is tight, so you’re going to have to make a choice fast. What are your goals? If it’s cash flow and forget it, I think purchasing an occupied NNN building is a good bet. Additionally, while I’m not sure how this actually works out with a 1031, you could look to purchase a small SFR portfolio. This may give you the best blend of cash flow and future more or less guaranteed appreciation and maximized exits depending on your market of choice (affluent area, great school district should be a solid bet). This would probably be more work.
Why do you recommend a SFR portfolio? Are the returns so much higher to be worth the squeeze given difficulty to scale? I've always seen SFR as a good starting point for investors, but not particularly strong on the risk-adjusted returns side of things, unless you're betting on an up-and-coming housing market.
Genuinely interested in hearing more about your take here.
If it's inherited and a current asset you should be allowed to do a Step up valuation based on current Trust laws and tax code. Then sell off properties when 1 or more come through structuring with contingencies on the 1031 exchange. You need to work with a Trust and Real Estate Attorney that focuses on Tax code.
Was the equity/assets held in a living trust? If so, then you get step up basis to current FMV so you're taxes should be minimal if you are selling. This works out great because you can then reinvest within your own time frame.
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