Scared money
So it looks like some of the 1031 money is running scared. What I’m hearing is that several exchangers are entering into their 45 day identification phase, not finding a replacement property, and then canceling the exchange. That’s probably not surprising. Right now we are near historic lows on the capital gains tax, so the fear of taking a tax hit is offset by the fear that you’ll purchase a piece of real estate that is overvalued or declining. There are still exchangers out there that because of depreciation and multiple 1031 exchanges are at risk for suffering a much larger than average tax penalty, but it’s becoming harder and harder for them to find a decent replacement property that can believe in. This is creating some creativity in the kinds of properties people are looking for. More on this later…