In the next few days, our apartment in Brooklyn, New York will go on the market and we will begin the first half of our long-planned, highly anticipated, excruciating project. Chapter 1031 Exchange. All in all, this deal will take us from cash flow $1 million in equity is $300 per month (hopefully) $4,000 to $5,000 per month.
What if you are only Join our journeywe’re documenting all the ups and downs, wins and losses—well, “learning moments”—in the quest to achieve a more favorable outcome Our ROI.
This month, we will enter the sprint phase Our “sales” stage. Tenants finished their last month with us in April actually Just moved a few floors to another available apartment in the building (that’s it Astonishing Our location is! Earlier this week we had the handyman there painting and polishing and today the real estate team is taking photos which will Virtual staging. Live listing is imminent.
exist “Target Property” (Purchaser) Partywe have been underwriting properties Until our fingers are sore. this This is where most of our energy and sleepless nights are spent instructed. It’s a steep learning curve.
Here’s what we’ve learned over the past few weeks.
Timing is everything
I’m a planner but there’s only so much you can do actually Make progress in this 1031 world. An offer you like that comes days or weeks before you go on the market may be snapped up Before you are ready. It doesn’t matter. These are all good practices and you’ve learned a lot about identifying good deals In progress.
Not every seller can handle sales surprises
sure try Target your target early by including a sales contingency in the contract, but Not everyone will believe it. you know a Brooklyn Apartments is basically A bunch of gold bars, but sellers across the country may not have the same confidence or frame of reference.
The power of CMA
that’s why you Need one more comparative market analysis (CMA). what we learned used to be in the last month. Essentially, this is a mini platform that your real estate agent can use get to work Show you the strategy behind selling your property, your pricing, more supportive of ithow quickly these compensation contracts are signed, etc.
this Help convince rural Texas sellers that your sales contingency is beautiful Safe bet. Sometimes it works.
Options are everywhere
What if you are only Aiming to hit a solid base hit, we all agreed that was our goal – time was running out, maximum Our lifetime investments, crazy interest rates, etc., all of these are complicating factors – and you’ll find a lot of them. Realizing this relieved a lot of stress.
us need Turning our income from Brooklyn into a good investment. That’s the standard, and many deals meet this requirement. It puts our money into cash-flowing and mostly hands-off investments. We don’t need to walk away from this deal.
Check coverage, then check again
I almost pulled the trigger on a deal I loved. The numbers look great. I have Check input over and over again And check with your real estate agent.
Then I looked at the tax amount and it seemed very low. (Full disclosure, for me, who lives in suburban New Jersey, this all seems pretty low-key). I Checked it again. look, The number I use for my annual bill is actually this per month tax amount, which means Correct every year Amount is the number I have during the coverage period 12. oops. The deal has not been fully finalized since then.
No one can save you from trouble underwriting. I was lucky but forced myself to check – and check and check.
Consider a triple net lease
when Who are you Think about three attributes That You need to confirm within 45 days after closing, don’t forget to consider triple net properties (NNN). all these are real With “mailbox money” investing, you own the land and building, but the tenant pays taxes, insurance, roofing, Repair – Engineering.
The leases for these tenants are typically 10 to 20 years, they are usually Large and stable chain stores, such as fast food restaurants, grocery stores, auto parts retail centers, etc. (The first time I learned about the NNN property was in an episode of Real estate rookieIncidentally! Sleep until dawn Inner peace is what makes everything worth it.
Our 1031 journey so far:
This 1031 Diary will become a monthly series in 2024, documenting our (hopefully) successful and profitable 1031 Exchange journey starting in May. We’ll share everything – all the data, analysis, good decisions, what we wish we’d done differently, the big mistakes (hopefully not a lot) and everything in between.
Have questions? Any suggestions? What do we lack? Share it in the comments below!
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