1031X Strategy for out of State Coastal Properties | Source: Sesemi Realty

As a licensed RE?broker in both Oregon & California specializing in investment and absentee investors, I've noticed?a significant?increase in?interest for?exchanging proceeds from the sale of California properties for those on the Oregon Coast and beyond.?

One reality is that?those that utilize a 1031X?from the sale of property in California often have difficulty replacing a 'like' property with a superior asset due to the appreciation of property prices and competition throughout the State.?

Increasingly this has lead prudent investors to consider expanding their territory or geographical location for opportunity. ?The difference in potential value and projected returns is often so?significant I?wanted to share for?other individuals and professionals facing similar investment dilemmas.?

For a gross high level comparison in?the?San Diego, LA, Santa Barbara areas multi unit properties or those eligible for short term vacation rental usage are highly desirable and are generally offered at +/- $350k-400k-500k per door depending on condition, unit sizes and location. A seller of a 2-3-4 unit property in these areas likely?cannot reasonably expect to afford a superior?replacement property without further leverage or financing. At present, due to elevated prices and financing costs this can be very prohibitive and stall market activity as owners delay selling.?

In the past year on the Oregon Coast?we've noticed a steady influx of highly qualified liquid buyers from California explore the potential of investment beyond the Golden State.?

They are often very surprised by the value the Oregon Coast continues to offer, both in property quality and investment potential. The Oregon Coast statistically offers some of the highest return potentials for both multi family and short term rentals in the entire country.?This is partly due to perennial under development of housing,?a consistent migration from higher cost of living areas and a general 'under the radar' geographic?area one has to be fully?familiar with?to fully?appreciate.?

Imagine an oceanfront estate operating as an?existing vacation rental that returns near 10% at $1.4-2M in California??Or a coastal 9 Plex zoned commercial that with a total investment of $1.25M?should return $200k gross annually? Or a $400k walk to the?Pacific?beach home that your family uses and still earn 6-7-8% annual net returns? That's the type of properties I?moved to the OR Coast for and my clients analyze everyday.

Particularly for Southern California Coastal?investors that had the insight to invest early, there are many similarities to the current demographics and valuations along the Oregon Coast. The Coastal real estate?market is quite strong, with high quality listings receiving high levels of activity?and recently has?seen an uptick in interest and sales, specifically with investment properties. One buyer advantage of 1031X clientele that holds more weight in Oregon is that there are often dramatically fewer all cash offers and are generally encouraged to be fairly aggressive.?

I?personally have supported several?notable investment property sales for California clients utilizing proceeds from a 1031X or California property in just the past twelve months. I'm also currently working with no less than five incredibly seasoned investors from out of State looking to reinvest in the State of Oregon.?

As a result myself and my team have an incredibly focused list of the most profitable investment properties throughout the?State of Oregon (it's a short list) based on investment level, property type, condition and usage. More often than not, unless a?client is intent on expanding their California portfolio they are open to considering or at least exploring the options for possible?out of state investment and they're discovering the numbers speak for themselves.?

As always consult with a licensed CPA, tax professional or tax attorney for 1031X rules, regulations and formal tax strategy. Speaking of which..any specialized 1031X BP?members that can offer some insight or reference for those that find this post?

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