I will be doing a Reverse 1031 on an investment property in california. The reason I am not doing a traditional 1031 is because i don't like the 45 day identification rule to find a new investment property after i close escrow on the sale of my existing investment property. in other words, i want to be able to identify my new investment property first rather than be in a huge rush to find one after i sell my current property (i.e. the 45 day rule).

anyways I found the property that i want to purchase but the problem is i need to front the money as a down payment first to purchase this property (i.e. i need a big short term loan that i will repay within 6 months from the sale of my current investment property). what do you guys recommend the best way of getting this money w/o paying a ridiculous int rate from typical loan shark type of places?

also, i have assets that well exceed the value of the new investment property i am trying to purchase. the new investment property is more expensive then the current one i will be selling for this reverse 1031. Ie. near zero risk i default on this short term loan...

There's very few capital sources for low rate short term bridge loans to fund deposits. Your best bet would be to go to a traditional lender and offer to mtg existing properties to fund the deposit amount - and in return offer to give them the perm financing on this specific property (assuming you intend to lever it). Many communities banks and traditional non-cmbs/lifeco lenders should be willing to provide cheaper bridge financing for the relationship. However, I would anticipate paying a cpl pts up front + some sort of lockout period (6-12 mos).

In a case like this I would always say you should fund it yourself or try to borrow from friends + family as there really isn't a cheap alternative option for funding deposits.

IDK if reverse 1031 is a thing or a just your way of explaining your approach.

But rather than getting a short term loan, why don't you just make your offer on the new property contingent upon the sale of your old property?

This is very common...

thanks for the info. ya i talked to a bunch of traditional lenders they have these bridge programs but typically require a lock in of min 3 yrs (they want to guarantee themselves some money over 3 yrs at least at a high rate) rather than me just paying small fees and paying them back in full in 3-6 months.

i wonder how do real estate construction/flipping small companies fund their projects that require construction loans typically lasting 12-18 months. these type of construction loans are very common and i essentially need this type of loan although its not theoretically "construction" related.

Yeah its actually called a reverse 1031. I have done a regular 1031 last year and i know the process very well. Essentially the reverse is the same but with a few added steps.

This is generally looked down upon in the Southern california area by seller's realtors. This property is probably going to be multiple offers and usually sellers don't want to deal with people that have this contingency.

When I worked in commercial real estate, people with multiple investment properties had strong relationships with local credit unions and would have credit facilities available to them based on the equity in their other property holdings. They would allow these short-term type loans all of the time while multiple transactions had to close.

It sounds like you need to get some history with a local bank and have a VP there who can make things happen for you.

I'm not sure who you're talking to - are these funds/hard money lenders or traditional bank lenders?

You should be able to get financing for a year and instead of a mortgage you should be able to pledge an equity interest in one of your other properties (I'm assuming it's a traditional 10% deposit?)

Alternatively - what Rand says is generally true in illiquid markets. In major markets it's tough to get that contingency added but if it's a smaller market it may be a viable option.