Case Study: A Successful 1031 Exchange

Congratulations to our clients Singh and Sue Bakshi for selling their single family home investment property in four corners Silver Spring and successfully rolling the funds into a beautiful investment property in North Potomac.

We have worked with our clients, the Bakshi’s, for several years and they came to us with a desire to sell an investment property and use a 1031 exchange to roll the funds into a newer investment property closer to their home. They originally bought their investment property in Silver Spring in 2009 out of foreclosure and completed a beautiful renovation on the property and brought it back to life. They decided to hold on to the property and manage it as a rental as the market was soft after we advised them they would be able to maximize their profits by holding the property for a few years until the market improved. We were able to secure several great tenants over a 3 year period and in late 2012, they made the decision to list the property for sale.

We worked directly with the owners to touch-up the property and we put together a detailed marketing plan which included professional photos, staging, and a combination of online and traditional marketing which helped secure a contract within 2 weeks. By holding off for 3 years, they were able to realize an increase in market value of over $75K and received a stream of rental income while holding the property.

Once the ratified contract was in place, we employed the expertise of a qualified 1031 exchange intermediary and helped them identify a like-kind property in a better location within the 45 day window established under 1031 exchange guidelines. The property they identified received 6 offers in the first weekend and we were able to negotiate a ratified contract $15k less than the highest bid by structuring a cash deal and putting together a fully qualified offer. We also negotiated a rent-back with the existing owner which guaranteed a 3 month income stream that would allow them plenty of time to find long-term tenants.

A 1031 Exchange is a great tool for investors looking to re-allocate funds or to roll investment gains into a larger investment while deferring the tax owed on the gains. By understanding the benefits of a 1031 Exchange and the legal requirements established for a qualifying exchange, a 1031 Exchange can be a wonderful tool in an investors tool belt.
Interested in learning more about 1031 Exchanges and how you may be able to benefit? Give us a call or drop us an email today.

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