Key takeaways
- Sell when ROE drops below alternative ROE.
- 1031 to defer gain, never just to defer decision.
- Refinance recycles capital tax-free.
- Owner-financing exits can outperform straight sale.
- Plan exits 12–24 months in advance.
Core concepts
ROE-driven exit
Equity / annual cash flow + appreciation = ROE. < 6% triggers review.
1031 mechanics
45-day identification, 180-day close, qualified intermediary required.
Owner financing
Sell with seller carry — capital gain spread over years, often higher net.
Refinance as exit alternative
Pull 60–75% LTV, keep the asset, redeploy proceeds.
Step-by-step framework
- 1Compute ROE per property annually.
- 2Flag any ROE < 6% for review.
- 3Plan 1031 identification list 90 days before close.
- 4Compare refinance vs sale economics.
- 5Engage QI before closing on sale.
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Common mistakes to avoid
- Selling for emotional reasons.
- Missing 1031 timelines.
- Refinancing into worse terms.
- Forgetting depreciation recapture in sale net.
Frequently asked questions
Tax on a straight sale?
Federal capital gain + state + 25% depreciation recapture.
How does 1031 defer taxes?
Roll basis into replacement property; defer indefinitely (or step-up at death).
Refi or sell?
Refi if ROE > alternative. Sell if can't redeploy equity productively.
Owner-financing risks?
Default risk; mitigate with 20%+ down and strong note terms.
Action checklist
- ☐ROE calculated per property.
- ☐Exit triggers defined.
- ☐QI lined up if 1031 likely.
- ☐Tax projection before close.
- ☐12-month exit plan documented.
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