Smart Moves : How One CoupleTransformed Their Investment Strategy with a 1031 Exchange
By Ken Palmen
Dana and Dean D ., owners of a small office building in the mountains of Colorado , were growing tired of the responsibilities of handson property management . Their building , held in an LLC , provided consistent income but required constant oversight . Eager for a change , they sold the property to a local investor , structuring the sale with an ownercarry note , which allowed them to finance the buyer ' s purchase while securing passive income . When they included the note in the 1031 exchange , Dana and Dean opted to buy the note out , leveraging the proceeds to diversify their real estate portfolio across multiple assets . This innovative use of a note within a 1031 exchange highlights the complexity of the transaction and the advanced strategies available to savvy investors .
Dana and Dean seized the opportunity to spread their risk by acquiring a range of properties , each in distinct sectors and regions . Their first replacement property was a partial interest in a multitenant flex industrial and mixeduse asset located in Texas . Following this , they purchased an interest in a multitenant retail property in Birmingham , Alabama , giving them exposure to a thriving retail market . The third property they added to their portfolio was an interest in a storage unit building , also in Texas , providing them with a steady income stream in a historically stable sector . Finally , they rounded out their acquisitions by investing in a diversified portfolio of healthcare properties spread across the United States . This diversification allowed Dana and Dean to mitigate risk while enjoying the benefits of multiple income streams across various real estate sectors .
The transaction itself was not without its complexities . Handling the ownercarry note within the 1031 exchange framework required careful planning and precision . Additionally , Dana and Dean ’ s decision to identify and acquire more than three properties — exceeding the typical identification limit — added an additional layer of intricacy to the exchange process . However , with the guidance of Exchange Resource Group , LLC , they successfully navigated these challenges , emerging with a more diversified , less handson real estate portfolio . Their experience is a testament to the flexibility and benefits of 1031 exchanges for investors looking to evolve their real estate strategy while preserving wealth and reducing risk . 2023 .
For more information , please contact Ken Palmen , CES ®
Exchange Resource Group www . erg1031 . com direct : 303.579.5545 || office : 303.789.1031 || fax : 3034961031
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