It’s the season when we see many new single tenant, net leased / triple net retail assets for sale come on the market. These are perfect for sellers and buyers in a 1031 exchange because many or most of these opportunities require no active hands-on management on the part of the buyer.
This means location can be less of an issue, whether it’s a triple net sale leaseback of a newly built Tim Hortons in the Central Ohio / Columbus area or a net leased CVS or Walgreens in Santa Monica or Los Angeles. Even a Tractor Supply in Dallas or Omaha could be a great long term investment.
I’m seeing strong new inventory of NNN leased, national credit tenant properties for sale over the last week or so.
Since most of the interest in the above type of single tenant, triple net retail property for sale is buyer looking for a 1031 upleg, it’s a good time to review the four basic rules of a 1031. There are a number of other rules that must be followed, but the very basic follows
Four Basic 1031 Exchange Rules
Rule # 1 Both the relinquished property and replacement property must be held for investment purposes or used in a business and be ‘like kind’.
Rule # 2 The IRS requires the investor to identify the replacement property or properties within the 45 day ‘identification period’. The identification period begins the day of closing of the relinquished property. The replacement properties much be properly identified by the Exchanger.
There are many other rules such as the exchanger (buyer) may identify up to three replacement properties regardless of market value (Three Property Rule). Or they may identify unlimited number of properties provided that the total value not exceed 200% of the relinquished property (200% Rule. The minimum requirement is 95% of the value of the relinquished property
Rule #3 You must close on the replacement property the earliest of within 180 days of the closing of the relinquished property or the due date of the tax return or file an extension. And this is 180 calendar days … no time off for weekends or holidays.
Rule #4 On a delayed exchange, you must work with an IRS approved Qualified Intermediary.
For more detail
I’m licensed in California and Ohio so I’m the ‘go to’ source for a Santa Monica and Los Angeles and Columbus Ohio commercial realtor agent, but through the many affiliates, work all over the United States.
If there is any way that I can help, please feel free to contact me, Scott Harris at 310-473-4789 or 614-905-6614.