4 Things - Part 2: Time is of the essence

⏱ Time is of the essence

👀 Looking at our last transaction in hindsight, I think we conducted ourselves as if I had more time than was appropriate. The 1031 Exchange deadline is definitely the most unforgiving and immovable deadline I have experienced.

⛔ No holidays, no weekends, the 45 day identification period does not care.

💡 My initial take: Ideally we want to do as much property search work prior to the sale of our Relinquished Property.

🎬 In practice, this has been unfruitful, especially in a competitive market. I've needed significantly more time to close or a longer due diligence period to ensure we sell the Relinquished Property successfully.

🔎 Then we enter the 45 day identification period, in my opinion the most stressful part of the process.

🎯 My goal has been to have LOIs submitted and feedback received on all 3 identified properties. Ideally having one of the properties under contract by the end of the 45 day time frame.

After the 45 day identification period, the destiny of the exchange looks a lot clearer. Now we have 135 days to close one of the deals.

⏱ Sounds like a lot of time…don't waste a single day.

In our most recent exchange, we exited the 45 day identification period without a signed letter of intent, this was not ideal. The 135 day deadline was not our first concern.

Little did we know that we would not get the first deal under contract for another 45 days

📄 Reflecting on this, I think a big time sink was our overly complicated PSA. In our experience, it's not uncommon for a seller's legal counsel to take a week for each redlined response. As the typical incidental delays stack on top of this it can add up to a lot of time before signing a contract.

🤷‍♂️ With 90 days remaining, we felt that we still had ample time to close a deal. At this point negotiations had materialized with 2 of our identified properties.

⛏As we dug deeper into each of the deals, we built out detailed timelines to closing and searched for the Critical Path. We found that 1 of the properties had serious time risk. The Critical Path was the debt assumption and the timeline for this spanned through the holidays. Investigating further, we found out the assumption would take longer than the original 60 days we were quoted.

⤴ This risk steered us to the property we eventually closed on.

☝ Tip: Establish the mission critical dates upfront and enter them into a calendar, excel is fantastic at doing date math. Don’t be recalculating dates every week on your phone calculator when you can’t remember the deadline (I have been guilty of this). Check out the link to Critical Path Method below. This can help set priorities for any project.

📅 We closed our last exchange with 4 days to spare.

It's interesting to consider how differently you value each day depending on its proximity to the deadline