1031 Exchange | Case Study | Ross, CA
Investor Profile: The Caregiver
The client is in his mid 70’s and owned a single-family home in Ross, CA. Over the past few years, he has developed Alzheimer’s and has been in an assisted living home for the past 2 years. His daughter contacted us to see if it made sense to sell her fathers home or continue to rent it out for $7,000 per month. The property was debt free and represented around 80% of her fathers net worth.
We reviewed 3 different markets. His daughter was comfortable reinvesting in Oregon where the returns were higher than the Bay Area, and there was a growing economy. We reinvested approximately 2.45 Million into a 10 unit building in an A+ area of Portland.
The client’s daughter needed more income to cover her fathers assisted living cost each year. They were running a deficit of around 40,000 annually and needed to build up their savings in case of an emergency.
If they sold the rental home without reinvesting the proceeds, she would have a large tax bill of around $350,000 in capital gains. Selling outright would also mean losing the monthly income they needed.
A 1031 Exchange is a great solution to this problem. It allowed our client to defer any capital gains taxes otherwise due on the sale while trading up to a better performing property that will help achieve their long-term goals.
Father Getting Older
Transaction | Details
Property Sold | Exchanged
This is the original family home.
- Sales Price: $2,600,000
- Number of Units: 1
- Property Type: SFR
- CAP Rate: N/A
- Yearly Income: $84,000
Replacement Property 1
Multifamily residential (also known as a multidwelling unit or MDU) is a classification of housing where multiple separate housing units for residential inhabitants are contained within one building or several buildings within one complex.
- Purchase Price: $2,400,000
- Number of Units: 10
- Property Type: Multifamily
- Yearly Income: $135,000
- CAP Rate: N/A