Welcome to another episode of Ask Marco on the Passive Real Estate Investing show. You know, we've been getting some really good questions lately, so I grabbed about four, five, maybe six of them here today and I'm gonna go through them as quickly as I can and I'll take as many as I can. So let's jump right into it.

FREE copy of The Ultimate Guide to Passive Real Estate Investing.

If you missed our last episode, be sure to listen to Is It Wise to Buy Real Estate When Interest Rates are Rising?



The first question is from Todd. And Todd writes in, he says, Hi Marco, love the show. I am a long distance investor from California. Over the last 20 years, I've acquired over 50 doors in Ohio and Texas. These are a combination of single family homes and multi-family buildings. They are worth around $4 million and I owe about $1 million. I'm interested in selling some or all of them and doing a 1031 exchange into a higher value property or properties. What is the best way to accomplish this?

It seems daunting to try to sell all the properties at once. Thank you Todd. Well, Todd, great question. Yes I'm stressing thinking about it as I read your question. It is daunting. It is a task, a monumental task to try and sell 40 doors, or in your case actually 50 doors in an effort to do a tax-deferred exchange, a 1031. So first of all, I will say you are in a great, great position. Congratulations over the last 20 years you've amassed a $3 million addition to your net worth. I don't know what the cash flows are on your properties, but I'm sure you're probably sitting in a very good position. So congratulations to you. This is what I hope everybody does listening to this show and reading our content and visiting our websites is to create wealth and create passive income and be in a situation like you're in.

So this problem is a good problem, so congratulations on that. Now here's your challenge. Doing a 1031 means that you need to be selling all these properties or some of these properties, not necessarily on the same day, but within the same time period. And for those that don't fully understand a 1031 exchange, it's essentially a tax-deferred exchange. You need to sell your property within a certain period of time, take those funds through an accommodator, a 1031 exchange company and roll those into newer properties, not as new construction but new to you. So the challenge you have is that you need to identify the new property or the new properties within a 45 day period. That's not that difficult to do, especially if you're working with the right people or the right team. The identification piece is not that challenging and 45 days is typically more than sufficient unless you're in a very, very, very tight market like we have been over the last few years.

It is not so bad right now. We have a lot of inventory and a lot of deal flow. So the identification piece is not that difficult. The challenge is during that period you need to close on that property or those properties you've identified in the 45 days in order to stay within the 1031 guidelines. And if you don't, then the proceeds from your sale become taxable. You are not deferring the capital gains taxes. So the real challenge in my opinion is in selling your properties, multiple properties, plural within that time period to be able to close in 120 days, or excuse me, 180 days. So is it possible? Yes. Have people done it? Yes, we've worked with investors and clients that have had multiple properties that they've needed to sell and take the proceeds and roll those into newly identified properties. The challenge on your end is doing that with the number of doors that you're trying to sell.

So it may make sense for you to break that 50 doors down into smaller chunks unless you're trying to go for a much larger property with a higher property value and a larger down payment and take those 40, 50 doors, whatever you're planning to sell and roll all the sales procee...