Sell Now Or Wait?
Looking to sell Orange County, CA SFR rental and buy other properties possibly in Phoenix area.
Issues with selling (putting property up for sale)
1) Properties moving very slowly at this time
2) So likely selling (x1031) and closing escrow will be at least 2 months
3) I'll be out of the country all of December
4) Holiday season coming up
5) 45 day x1031 window to select new properties
Issues with not selling
1) Property values dropping locally
2) Property values in target area rising
3) Local market could be worse next year
Seems to me that logistically I'll need to wait, but??
Any comments on whether I should sell or wait next year to start this(say February)???
Thanks.
most of the questions you have asked are personal choices but for me if i need ed to sell i would not speculate on the re market for next year. only for buy and hold. i may would hold for spring, in my area its the best selling season......km
You have a time crunch from the way the calendar is set up and your schedule. Things will slow down around the holidays and there is a hard time limit or two with a 1031.
I am not sure that I buy that things will dramatically fall in one market and continue to fly along in the other. The two markets are different but that extremely so.
Either find a way to change your schedule or roll the dice.
The 45 day limit is to identify and you can identify 3 properties and only complete on 1. Hence there is some flexibility. The 180 day time limit is also there but not close to the holidays.
If you price things right now it will sell now and that will get the 45 day clock cooking.
Figure out what the 1031 is worth to you and make some changes. Either roll the dice for next year, pay the tax or move some some dates around.
John
PS. You could just hold, refinance and buy in AZ. A partial solution that might fit better.
[addsig]
One more thing...
Check with a facilitator who handles a lot of 1031 deals. My last one was a long time ago.
See if you can lease/option something now and then declare it as the target after you complete the sale of the CA property. You could do a 1-2 year option with the intent to exercise within the 1031 period. Not sure how the IRS looks at a deal where you have a prior interest (the lease/option).
If it works you get to identify early. Risk is you never sell the CA place. You can figure out how best to deal with that (walk from the option, refinance, extend the option, use other sources of funds to exercise).
John
[addsig]
You may want to ask an experienced 1031 exchange agency about the possibility of a reverse 1031. In a reverse 1031 you buy the "Other" property prior to selling yours. Rules still apply but all of the tax and court rulings I am aware of have been favorable on reverse exchanges. One potential problem would be not being able to sell your property within the allowable time so it would be prudent to have several options ready to sell your existing property. For example, try to sell retail for xx days, and have an investor lined up who is willing to buy for an agreed price and subject to the exisiting financing as one of your backup plans, etc.
Also, with the right contract clauses, you may be able to extend closing on the property you plan to purchase until you have a solid sale of your existing property lined up (but not yet completed). With realtors help ,and your backup plans if they cannot sell it, you might not have to be present to complete the sale by having an attorney close for you, etc. Thereby working around the fact that you will be unavailable in December.
Happy exchanges.[ Edited by Mantis on Date 09/15/2004 ]