Q: I own a single family home in NJ and am thinking of doing a 1031 exchange for an apartment building in California where I live. Do you think this is smart or should I hang on to a house located in an excellent neighborhood back east?
A: I think it’s very difficult to own rental property 3,000 miles from where you live. There’s no easy way for you to check on how the property is being maintained and what the tenants are doing to it. And not knowing can have disastrous financial consequences if what your tenants are doing is illegal.
I think you’re much better off taking your profit out of this property, executing a 1031 tax-free exchange and buying an apartment building near where you live.
Please consult with a real estate attorney or 1031 specialist to make sure you complete the transaction in a timely fashion.
Jan. 19, 2009.