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    1031 Education/Planning

    People don’t plan to fail…

    If you’ve been following me, then you know that more than 60% of 1031 Exchanges fail every year. While I am not privy to every single reason why, one of the main common threads to the unraveling is the sheer lack of planning.

    Every year, including in 2020, I hear of a seller who is in escrow with their down-leg (current; to be relinquished property) and they are still considering their exchange options.

    If you are in escrow without a mapped plan, you are already lost

    Guess what? It’s too late, if that is where they are at (unless they’ve got an exchange wizard at their disposal, and I’ve been called that FYI).

    Seriously, any investor who begins to consider the disposition of an investment property that has significant equity with little to no debt, should start their exchange conversation and planning right then and there!

    I won’t go into the intricacies of ownership and whether the investor’s current ownership entity even has the ability to exchange (not all can! you can restructure, but that may take several months, even up to two years to do properly… I’ll cover this in another blog post).

    What the exchanger/investor needs to consider first are their short-term and long-term investment goals, and how they play into their overall succession plan… another topic to be discussed at another time!

    Once they’ve considered how this transaction will impact her investment plans, next is to have their broker (buy side representation) scouring the market for exchange options (upleg), in order to get a clear picture on what the market is bearing in relation to pricing, cap rates, lease structures etc. In addition, they should have their financial planner talking to Delaware Statutory Trust (DST) Sponsors to weigh those options as well.

    Once they have taken these steps, considered all of their options and have some educated insight, now we can put their current asset on the market, knowing they have a plan completely mapped out. Once an offer is accepted and their buyer’s earnest money deposit goes nonrefundable, offers for available exchange options that fit their investment criteria, can start to be submitted.

    Even with this level of planning, the process can still go sideways, which is why you want to be as prepared with your plan of execution as possible before you close escrow on that property to be relinquished, because that 45 days goes by very fast.

    If you are an investment property owner who is interested in a no obligation, private consultation, please visit, or contact James Bean of SVN-Rich Investment Real Estate Partners, CA DRE# 01970580, at 805-779-1031, or email at

    If you are an agent/broker, I am happy to discuss strategies with you on how to best serve your next listing client in preparing them for a successful exchange. Please visit the site and click on the Agent’s button.

    Don’t know what certain terms mean? Click here for a Glossary of Terms:

    Please stay tuned and follow us on LinkedIn, Twitter, Instagram & Facebook while keeping a look out for our exchange-specific content and coming YouTube Channel!

    All information is deemed to be accurate, and not advice. All investors/taxpayers should consult their CPA, tax attorney and investment advisors.