Achieving a Seamless 1031 Exchange: Maximizing Value Amid Challenges
Challenge: When the owners of a nine-unit apartment building in San Rafael faced a reverse 1031 exchange deadline, they knew the stakes were high. They needed not only a timely sale but also the best possible price and terms to maximize their investment. The property, however, presented several hurdles: rents were well below market value, the building had deferred maintenance, and previous renovations had been done without the necessary permits. Additionally, rising interest rates and historically low market velocity further complicated the prospect of a fair sale.
Action: We quickly assessed the situation and formulated a strategy. First, we conducted a comprehensive rent survey, adjusting rents to reflect current market rates. To address the permitting issues, we collaborated with the City to arrange retroactive approval, ensuring the building’s compliance and boosting its appeal to prospective buyers. We then launched our “Full Market Exposure” program, reaching out to qualified buyers directly and ensuring the property received maximum visibility.
Results: Through this approach, we identified a buyer who not only understood the building’s tenant base but also had the expertise to manage the property effectively. The sale was completed within the reverse 1031 exchange time frame and at a favorable gain, providing the owners with a smooth, profitable transaction despite market challenges.
Property Description
1400 Lincoln Avenue is a low-rise, two-story multifamily apartment building with a total of 9 units. The building encompasses 7,180 square feet of living area on a 0.21-acre lot, and was built in 1962. It is classified as a Class C building under the RH4 zoning. The unit mix includes one 1-bed/1-bath, seven 2-bed/1-bath, and one 3-bed/2-bath units. Average unit sizes range between ~586 to 1,206 sq ft, depending on the layout. The property offers a parking ratio of approximately 2.51 spaces per 1,000 sq ft. Units include air conditioning, dishwashers, ceiling fans, and storage space. Site amenities include laundry facilities and additional storage.
Location Description
Situated in San Rafael, Marin County, this property lies in a well-established residential neighborhood. The Lincoln Avenue address provides relatively easy access to nearby shopping, dining, and public services. San Rafael’s location in the North Bay offers residents proximity to the Golden Gate Bridge and commuter routes into San Francisco, while also being close to Marin’s natural amenities such as parks and open space. The area is likely to attract renters seeking a balance between urban convenience and more relaxed suburban living, with relatively mild commutes, good schools, and potential for steady demand.
Highlights
- 9 units total with a mix of 1-bed/1-bath, 2-bed/1-bath, and 3-bed/2-bath layouts
- Total building size ~7,180 sq ft on a 0.21-acre lot
- Year built: 1962; two stories; Low-Rise apartment style
- Class C building under RH4 zoning
- Parking ratio of ~2.51 spaces per 1,000 sq ft
- Unit amenities include: air conditioning, dishwashers, ceiling fans, and in-unit/storage space
- Site amenities include: laundry facilities, additional storage
- Reliable income stream; existing rent structure provides upside potential due to “low rents” (i.e. potential to raise rents)
- Useful for investors seeking longer-term value through upgrades or repositioning
Testimonial: “Ces delivered on every promise. They reached out to all qualified buyers, ensuring we achieved the best possible outcome. Their guidance throughout the sale process was invaluable. I’d recommend Ces to anyone looking to sell their commercial real estate.” – Joe Garbarino