Residential Real Estate
If you are contemplating a reverse exchange of residential real estate properties, here are a number of things to consider:
Complexity. While a reverse exchange is more complex than a forward exchange, the complexity for you, the Exchangor, can be reduced by way of a modern, comprehensive reverse exchange process. At ExStra, we have processes that handle the complexity with virtually no exceptions, meaning that once you start, the results are consistent, predictable and safe. Also, we are specialists in reverse exchanges that involve multiple properties, making improvements to Replacement Property and in dealing with complex ownership structures.
Is a reverse more expensive than a delayed? Reverse exchanges have higher fees than forward exchanges. This is true but the fee for handling the transaction is usually not the best way of determining the right strategy to use. For example, if your properties generate rental income, then a reverse exchange may be the best choice financially. This is true because you, the Exchangor, continue to receive the rental income from you’re the Relinquished Property during the exchange period in addition to any income generated by the Replacement Property that you are buying. You potentially have two sources of rental income during a reverse exchange. By contrast, during a delayed exchange, your Relinquished Property is sold and the cash proceeds are given to a QI until the Replacement Property is acquired. Your Return on Investment (“ROI”) during a delayed exchange is going to be at or near zero. We’ll be happy to help you analyze your situation to determine the best way to maximize your Return on Capital during an exchange. You can also use the analysis tool we provide, which is available here.
We are very competitive. We want your reverse exchange business and we will match or beat any competitive fee quotation for a similar reverse exchange. In addition, for the fees we charge, we provide:
- A fixed and flat fee with no hidden charges or holding charges if your exchange goes longer than anticipated.
- A new LLC which will never hold assets other than yours and which will either be assigned to you or dissolved at the conclusion of the exchange.
- A thorough analysis of your best “exit strategy” so that the transfer of the Replacement Property is done with maximum continuity of loan, title insurance and liability insurance as well as minimum exposure to unnecessary taxes.
- Asset security provisions that are the same as those used for much larger and more complex exchanges of commercial real estate. See Security Devices for more.
Commercial Real Estate
If you are an experienced Exchangor and are contemplating a reverse exchange, please consider the following when choosing your Accommodator:
- If you are buying properties using “cap rate” as an indicator of potential Return on Investment (“ROI”), then it is likely that operating income is of primary importance to you. If you sell your Relinquished Property (income producing) using a delayed exchange then your operating income and ROI go to (near) zero by definition during the exchange period – for up to six months. This is not the case in a reverse exchange. It is often the case that ROI is far superior in a reverse because you may have two sources of income during the exchange period. We’re delighted to provide assistance with modeling ROI and/or you can download our modeling tools here.
- Our experience and track record involve the successful execution of thousands of reverse exchanges. Our processes and security devices are state-of-the-art. For us, reverse exchanges are never regarded as a “second-class citizens”, as they are at most other QIs.
- We are tenaciously cost competitive and will not be undersold.
- We have proactively engaged with a number of commercial real estate lending practices in leading banks around the country to integrate our reverse exchange process with their credit and underwriting processes. Give us a call to explore whether one of these Lenders would work for your situation.
- We specialize in improvement exchanges as well as hybrid, composite or back-to-back structures involving multiple properties that can provide up to 360 days to complete a particular strategy. Click here for more.
- We are able to practice a great deal of flexibility regarding environmental issues, unusual purchase and sale arrangements, venue and other matters that many reverse accommodators cannot or will not be able to deal with.
- We have a great deal of expertise and experience with swap & drop and drop & swap strategies involving partnerships.
- We are specialist at non-safe-harbor parking arrangements. For more, click here.
- We offer the most advanced asset security devices in the industry. These augments to our standard processes ensure perfection of interests, bankruptcy remoteness and execution assurance. Click here for more.