Puget Sound MultiFamily Real Estate Blog



Nov. 19, 2020

Top 10 Misconceptions About 1031 Exchanges for 2020

For 2020, here are our latest top 10 misconceptions we’ve found that the public has about 1031 Exchanges.

    1. COVID-19 pandemic 1031 Extensions 
    2. Replacing Debt
    3. The Term Like-Kind
    4. Vacation and Second Homes Qualify
    5. Reverse Exchange
    6. Partial Exchange
    7. Qualified Intermediary Advice
    8. Identification Rules
    9. Timing Deadlines
    10. Loans, Equity & Tax Basis
  1. COVID-19 Pandemic 1031 Extensions

  2. IRS issued extensions that were granted for the 45 day Identification and 180 day exchange period for the COVID-19 pandemic are still in place
    IRS extensions granted due to the COVID-19 pandemic ended July 15, 2020.  Sign up here to be notified if the IRS grants further extensions.  Be sure to check out our Coronavirus 1031 Resource page for the latest news.
    Helpful link:  Covid-19 1031 Exchange FAQs

    Replacing Debt

    You must replace the debt that you had on the Relinquished Property with at least the same amount of debt on the Replacement Property
    Many taxpayers (and tax advisors) are under the misconception that the IRS mandates that they must have equal or greater debt on their 1031 Exchange Replacement Property (property they are purchasing). You do need to replace the VALUE of the debt paid off on the Relinquished Property. However, the debt does not have to be replaced with debt. The exchanger can always bring their own cash (from outside of the 1031 Exchange) to the closing table for the Replacement Property to offset any reduction in debt, or use other options.
    Helpful link: See examples at Replacing debt in a 1031 Exchange

    The Term Like-Kind

    “Like-kind” is restricted to the same kind of real estate which means I must exchange the same type of property, for example, an apartment building for another apartment building
    The term “like-kind” refers to the nature or character of the property, not its grade or quality. For this reason nearly all real property is like-kind to all real property, meaning that you can exchange an office building for an apartment complex, a strip mall, a warehouse, single family rental properties or even vacant land.
    Helpful linkSee what is qualified like-kind property?

    Vacation and Second Homes Qualify

    Vacation or second homes qualify for 1031 Exchange tax deferral 
    You can sell your investment real estate and reinvest the gain, tax deferred, to purchase your vacation or second home, however the challenge is making sure it will qualify as a 1031 investment property. Certain requirements must be met. Click the links below for details.
    Helpful links:  Do Vacation and Second Homes Qualify?
    How to Buy Your Vacation Home with a 1031 Exchange
    Strategically Buying Your Dream Vacation Home with a 1031 Exchange

    Reverse Exchange

    In a Reverse Exchange, it’s as simple as buying new 1031 Replacement Property first, as long as my Relinquished Property is sold within 180 days 
    In concept the Reverse Exchange is simple, but in execution, there are details and rules that must be followed. In a Reverse Exchange, you cannot own your Replacement and Relinquished Properties at the same time. Many do not realize that that title to their new Replacement Property must be “parked” with an EAT (Exchange Accommodations Titleholder) until their old Relinquished Property is sold. It takes considerable time to properly structure and execute a Reverse Exchange. Before you close on any property sale, reach out to IPX1031, your Qualified Intermediary, to ensure your 1031 Exchange is properly structured, timed and executed.
    Helpful links:  Reverse 1031 Solutions
    How to Initiate a Reverse Exchange

    Partial Exchange

    It’s not possible to do a partial 1031 Exchange
    A 1031 Exchange does not need to be an all or nothing scenario. You can do a partial 1031 Exchange which qualifies for tax deferral under Section 1031 of the Tax Code. If you purchase property lower in value or take a portion of the cash from the closing of the sale and only invest a portion of your proceeds towards a 1031 Exchange, you will have a partially tax deferred transaction rather than deferring all of your taxes. You will pay taxes on those funds not reinvested (commonly referred to as boot).
    Helpful linksPartial 1031 Exchange
    Boot in a 1031 Exchange

  1. Qualified Intermediary Advice

    A Qualified Intermediary gives tax and legal advice as part of their role
    While a Qualified Intermediary (QI) like IPX1031 is generally needed to create the “exchange of properties” and safeguard the exchange funds, QIs cannot provide tax or legal advice. IPX1031 cannot act as your advisor to structure your exchange transaction. While IPX1031 provides tools like our Capital Gains Estimator, always talk to your legal and tax advisors to determine what is best for your individual situation.
    Helpful link:  How Important is Your Qualified Intermediary?

  1. Identification Rules

    I can change my identification after day 45 if that property has been sold to someone else and if needed, I can buy other 1031 Replacement properties that I didn’t identify
    The 1031 ID rules are strict and very important. We’ve seen many exchanges fail due to exchangers not following these 1031 Exchange identification rules. From the day your Relinquished Property closes, you have 45 calendar days to identify potential replacement property using the 3 Property Rule (most common), 200% Rule or 95% exception. You can change your identification at any time prior to the expiration of the identification period. If you did not identify a property in the proper time period, that property does not qualify for 1031 treatment. In the case of an identified property no longer for sale, if you have no other identified property and it’s after day 45, your exchange will fail. Remember to start your search for identification property early – even before your Relinquished Property closes – so you have a head start in the identification process.
    Helpful linkDeadlines and Identification Requirements
    Video link:  1031 Exchange Identification Requirements 

  1. Timing Deadlines

    I have 45 days to identify then an additional 180 days to close
    The 45 and 180 day periods are not separate time periods. All must happen within a total of 180 calendar days. From the time your Relinquish Property closes, you have 45 calendar days to identify your Replacement Property. Then you must buy and close on any identified Replacement Property(ies) that you want to purchase in your exchange within a total of 180 calendar days. Timing rules are strict and cannot be extended even if the 45th day or 180th day falls on a Saturday, Sunday or legal holiday. They may, however, be extended by up to 120 days if the Exchanger qualifies for a disaster extension under Rev. Proc. 2018-58.
    Helpful linkDeadlines and Identification Requirements
    Disaster Extensions
    Video link:  1031 Exchange Time Constraints 

  1. Loans, Equity & Basis

    Loan balance or equity increases tax basis in a 1031 Exchange
    The term “basis” is the cost of a property for tax purposes. When you sell a property, the difference between the sales price and the adjusted basis in the property will determine the amount of capital gain which is taxable. Loans or equity are typically not relevant and do not factor into basis. Click below to learn which items increase basis and the equation to determine adjusted basis:
    Helpful linkWhat increases tax basis in a 1031 Exchange?

Information Provided by:

Kyle Williams
Vice President - Account Executive
(425) 582-3487 - Mobile



Posted in Market News
June 17, 2020

Inslee extends eviction moratorium

Update August 2020: Governor Inslee announced on 7/24/2020 an extension of the evictions ban in place across the state through October 15, 2020.


Gov. Jay Inslee extended protections for renters today as COVID-19 continues to impact the finances of Washingtonians statewide.

The governor first proclaimed a moratorium on evictions in mid-March, then extended and expanded the moratorium in mid-April. 

Proclamation 20-19.2 extends the prior eviction moratorium for 60 days (through August 1), and makes modifications to the prior moratorium. The modifications include, but are not limited to:

  • Prohibiting retaliation against any tenant who invokes rights or protections under the proclamation;
  • Permitting eviction based on property damage, except for damage that is not urgent in nature, including conditions that were known or knowable to the landlord prior to the COVID-19 crisis;
  • Establishing a defense to any lawsuit for tenants if a landlord fails to offer a reasonable repayment plan;
  • Establishing a minimum of a 14-day length of stay at a hotel, motel or at other non-traditional dwelling situations in order to trigger the application of this proclamation to those dwelling situations; and
  • Allowing owners to evict tenants if the owner plans to occupy or sell the property, after providing at least 60 days’ notice; and
  • Exempting commercial property rent increases that were executed in a rental agreement prior to the date the state of emergency was declared, on February 29.

Other restrictions, including the prohibition on assessing late fees or other charges, are continued in this order.

The proclamation also encourages landlords and tenants to communicate in good faith with one another, and to work together on the timing and terms of payment and repayment solutions.

Read full proclamation HERE

Posted in Market News
April 29, 2020

Fourplex for sale in Tacoma | 3302 N 26th St, Tacoma



Classic fourplex located in the highly desirable North Tacoma/ Proctor District w/ Value-Add Potential. Unit count consists of (2) 2bed/1bath, (1) 1bed/1bath, & (1) studio. Tons of upside in rents; market cap rate=8%! Large basement(1000SF) could potentially be converted to 5th unit or storage for add'l income. Most plumbing & electrical has been updated, new water heaters installed Oct '18. Coin-op washer/dryer. Excellent rental property within walking distance of University of Puget Sound.

>>CLICK HERE<< to search all Fourplex for sale in Tacoma

Posted in Exclusive Listings
April 23, 2020

Landlord Tips for COVID19

So much of real estate feels like a moving target in the era of COVID19.  Just this week Gov. Inslee extended the moratorium on evictions until June 4, and also enacted a rent freeze. To help navigate the changes and assist landlords in protecting their investments we’ve assembled a few tips and best practices for landlords and investors amidst COVID19.

Rent Collection:

As more tenants find themselves in a financial bind and unable to pay rent, here’s a few ideas on mitigating the loss of income.  

  • Convert all or part of the security deposit into rent
  • Offer a weekly payment program (some tenants might have an easier time breaking the rent into smaller chunks)
  • Offer a later payment date.  Perhaps they can pay by the 10th or the 15th and your mortgage payment isn’t due till after that. 
  • Offer tenants incentive to pay rent up front - for example: offer a 30% discount on rent if they pay all rent for the rest of the year
  • Create a payment plan, here’s one idea:
    • Allow month of April/May to be delayed and paid over the course of a 10 month period - for example, 1 month rent = $1000… if not paid for month of May then payments made June - March 2021 could be $1100 
  • Offer a pay by credit card option and waive any credit card fees associated with that

We also recommend some amount of screening before offering any rent abatement or forgiveness.  Creating some kind of simple application for tenants to describe exactly how COVID19 has impacted them could ensure that you are helping actual hardships, not just handing out discounted or free money to tenants who might not need help right now.  Also remember to get any agreement or plan in writing and signed by all parties!  


Mortgage Payments: 

More Resources: 

https://www.rhawa.org/covid-19## Rental Housing Association of Washington has great resources, webinars, and support for both tenants and landlords.

April 15, 2020

Duplex for sale in Lake Stevens | 9004 10th Pl SE Lake Stevens



Prime West Lake Stevens duplex right by some of the highest rated schools in the region. Nestled in a quiet cul-de-sac with easy access to Highwys 9, 2, Boeing, Everett & Paine Field. Well cared for & separately metered. Townhome-style units with desirable floor plan:2 bed/1.5 baths, attached garages & large individually fenced yards. Tons of off-street parking. Long term tenants are month to month w/ huge upside in rents. Median rent for neighborhood $1600 puts pro forma cap 6.6% Never a vacancy. DO NOT DISTURB TENANTS! 

>>CLICK HERE<< to search all Duplex for sale in Lake Stevens

Posted in Exclusive Listings
April 6, 2020

Pick of the Week: 10-Unit for sale in Tacoma | 6801 Pacific Ave, Tacoma

Pacific Square Apartments is a 10-unit multi-family building in the South End of Tacoma. Turn-Key & spacious 1 bed, 1 bath units with solid cash flow and low maintenance requirements. Half of the units have been fully updated with stainless steel appliances, LVP flooring, white shaker cabinetry & quartz cabinets. Centrally located - easy access to I-5, bus-lines and shopping/dining. Ample off street parking for tenants and on-site laundry room for additional income.

March 27, 2020

6-Unit Apartment for sale in Seattle | 5602 30th Ave NW, Seattle

Rare opportunity to claim a legal four-plex on a peaceful, 4850 sq ft corner lot w/ alley, convenient to bus lines and the amenities of Ballard. With three 2-bed units & a 1-bed unit (in-unit laundry), this well-maintained property also features a carport, fenced yard, shared laundry room, & bonus storage space in the basement. LR3 zoning provides maximum flexibility, initial feasibility study complete w/details available on request.

>>CLICK HERE<< to search all 5-9 Multi-family properties for sale in Seattle



Posted in Exclusive Listings
March 27, 2020

Sound Market Thoughts During COVID19

In 2005 Hurricane Katrina devastated the infrastructure, economy and every aspect of normal life in the New Orleans and gulf region.  Currently the world is experiencing a similar interruption and catastrophe with the COVID19 pandemic. The virus has made landfall in Washington State (and most of the US), and we don’t yet know how long the surge will last or how far reaching the devastation will be.  Here’s a few miscellaneous thoughts from Sound Realty Group on how and what the aftermath of CoronaVirus will look like in real estate in the Puget Sound region, and specifically the multi-family scene.  

  • Economists are projecting this recession to have a V-Shape rather than a U or L shape which have defined other recession patterns- we will quickly hit a low, but bounce back forcefully and fast.  
  • We are simultaneously experiencing 2 different economies right now.  One being the hard-hit sectors including service/hospitality where many Americans are jobless and financially hurting.  Also - with the stock market fluctuations many Americans have seen their retirement and/or savings wiped out. The other economy is still robust and includes certain businesses and parts of the tech industry that are thriving right now due to lifestyle shifts and new consumer demands.  America needs these two different economies to come back in alignment, but that will not be an immediate process.  

  • At SRG we have seen how real estate overlaps both of these economies with the stock market being so volatile right now, real estate is becoming a more desirable asset to many investors..  In several asset classes the real estate market is still robust, hot and strong!  We’ve seen fierce competition in the residential and multi-family arenas. Here’s a few projections on how that will play out in the immediate and near future: 
    • Short Term Multi-Family: rent rates will flatline (we’ve experienced rapid appreciation over the last several quarters in the greater Seattle area).  With the Government’s moratorium on evictions and enhanced guidelines for landlords we can count on rents to stay where they are at for the next few months.
    • 6-9 months: We’re predicting vacancy rates to tick up some amount as the ripples of this disruption cause some tenants to move due to altered financial situations.
    • Competition is still strong suggesting that values might hold steady.
    • Multi-Family inventory has ticked up in the last few weeks, but it's too early to tell if this is a solid trend that will continue.
  • Different asset classes will respond differently.  
    • Hospitality and brick and mortar retail are taking a huge hit and recovery will probably be slow. 
    • Office Space: in the greater Seattle area demand was high before COVID19, we have yet to see if all of that demand will return as many sectors/businesses learn to work from home.  
    • Senior Living is already taking a huge blow from COVID19, expect more regulations in the future, and consumer apprehension as a repose to the senior living facilities playing a role in the pandemic.
    • Residential/Single Family Housing: currently residential construction is deemed non-essential so many projects are halted.  This is cause for concern since inventory and supply was already limited before COVID 19. If these projects continue to be delayed we will continue to see an unbalanced seller’s market and lack of inventory.  
    • Multi-Family Housing is predicted to hold steady through this crisis.  Rent rates and vacancy rates will probably fluctuate so an investor’s business model will need to shift, and we will see some fluctuation in cap rates, but this will remain a sought-after and stabilized asset class.  


Want to discuss real estate investing and the economy more?  Contact us to talk through your investment strategy amidst COVID19! 

Feb. 13, 2020

8-Unit Apartment for Sale in Lakewood | 5810 5816 77th St W


8-unit property consisting of (2) fourplexes on a 24,000 SqFt lot. This is a solid, turn-key investment property offered @6.2% Cap Rate. Meticulously maintained by current owner for 23 years; fully occupied w/ quality tenants & upside potential in rents. Each unit has 2bed/1bath, wash/dryer & private patio/balcony. Recent capital improvements include new windows/patio doors throughout, decks/railings, ext. paint, & parking lot resurfacing. Nice North Lakewood location bordering University Place.

>>CLICK HERE<< to search all 5-9 Unit Multifamily properties for sale in Lakewood

Posted in Exclusive Listings
Feb. 10, 2020

Thoughts on the Housing Shortage:

We’re missing 225,000 housing units.  From the year 2000 to 2015 there were 225,000 housing units that should have been built in Washington state but were not.  Various reasons and issues created this gap - the recession, construction costs, a diminished labor force in the building industry, oppressive government and municipal regulations, land use and building code etc… Supply and demand is economics 101, but the local trends have not honored this principle with the job and population growth creating a demand that the supply falls dramatically short of. This missing number of houses includes both owner and rental units, and it impacts everyone in slightly different ways.  It impacts the young professionals who would/could be first time buyers but are priced out of the neighborhoods they want to live in.  It impacts the families that want to raise their children with enough space in an affordable, but nice neighborhood. It clogs the freeways and traffic as more residents flee the urban core looking for affordable housing and then congest the roads commuting to their jobs.  It hits the low income renter who watches rent rates creep up and sees their rent dollars yield a diminished rental property condition and location. As WA residents we all pay for this 225,000 disparity in different ways, and we hope that solutions are enacted soon that effectively close the gap.



At Sound Realty Group we see this issue through the investor/property owner perspective.  Here’s what this 225,000 unit shortage means for landlords: There is a desperate need for “affordable.”  That doesn’t necessarily mean low income, but it does mean “attainable.”  “Since 2000, the state under-produced 181,000 rental units for households earning 80% or less of AMI relative to the increase in the number of households formed in these income levels.”  That means that out of that 225,000 number, 181,000 units should have been for average, middle income renters. AMI (Area Median Income) in King County households for 2016 was $84,897. This isn’t just a low income problem, this is a middle class problem.  Working with this number and applying the 30% rule (ideally 30% of one’s income covers housing costs) this median King County household would be paying around $2,100/month in rent. The current opportunity for landlords is creating and curating a rental product that appeals to that middle income renter.  The majority of the new construction apartment projects being delivered target a higher income renter. These buildings are typically more luxury level, with high end amenities and a high price tag for monthly rent plus extra fees. Some of these high brow amenities could/should be replicated in the middle class and “mom and pop landlord” rental space, like secure package delivery space and pet rent options. 

However, most median income renters are just looking for an affordable and clean rental unit in a safe and conveniently located neighborhood. We’re encouraging our clients to invest in this space since the data points to a need for rental space for middle and low income tenants. Hopefully more development and government regulations will contribute to more units (both rental and owner occupied) coming online to serve this gap, but until then we recommend buying/building and holding onto this type of real estate! 



Sources: https://ofm.wa.gov/sites/default/files/public/dataresearch/economy/median_household_income_estimates.pdf



Posted in Market News