Our Exchangor was referred to us the day before relinquishing his 7-11 store. His intention was to acquire an industrial property that his manufacturing company was to occupy and the property was going to need improvements. We had the answers for his 1031 exchange…
The Deal’s Details
The reason we had received the late call to get involved was the demands of the improvements to the target replacement property. Another exchange company had been involved but was having problems with the details of the property to be improved.
After our initial analysis of the Exchangor’s objectives we found that in addition to the industrial property our client was interested in acquiring a fast food restaurant in Texas. With this discovery we informed the Exchangor the option of merely acquiring the two properties in a delayed exchange instead of structuring an improvement exchange, by choosing this option he could save himself thousands of dollars in exchange fees.
The second targeted property and the initial purchase of the industrial property combined met the exchange’s value and equity requirements, even without the improvements to be constructed. After presenting the option of passing on the improvement exchange, the Exchangor opted to move forward with the improvement exchange just in case something happened with the second replacement property.
We acquired the industrial property, the improvements were completed and the property was transferred to our client. In addition to the industrial property our client moved forward with the second replacement property, the restaurant in Texas. As the negotiations moved forward it became apparent additional funds would be necessary for the restaurant’s purchase and we explored adding funds via the Exchangor’s IRA. We ran into an issue using the IRA funds since the loan would have had to be non-recourse for the IRA’s involvement and a commercial loan in such a small amount was not available at the time. A loan was secured that worked with the cash available and the exchange was completed.
Our Exchangor found the opportunity of using his IRA to acquire another investment was very attractive and has now moved forward to do so using our sister company IRA Advantage. Buying real estate with a Self-Directed IRA in today’s Real Estate market is simply too good to pass up in this investor’s mind!