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More Flexible

More Flexible

A 1031 exchange is one of the most often used methods in commercial real estate for purchasing and selling property in a tax efficient way. On paper, the process is simple…sell a property and acquire another property while deferring the taxable gains according to 1031 exchange rules. While that is true in principle, in the competitive world of Southern California real estate, it rarely works out quite that easily.

One F&M Bank client with the goal of purchasing retail storefront, multi-family, and industrial properties while still maintaining compliance with 1031 exchange rules, needed flexibility beyond individualized loans that could slow the acquisition process. To help ensure our client could acquire the properties they identified, F&M structured a line of credit that would align with 1031 exchange rules. The line of credit allowed our borrower to make purchases that were limited to 50% of the collateral where the subject properties would meet specific loan covenants, debt service coverage ratios, and property types.
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Some account features and benefits may be subject to separate application, agreement, fees, and/or approval. Terms, Conditions and Limitations may apply.

A Custom-Tailored Solution

F&M Bank’s Regional Relationship Manager created a structured line of credit for $9,000,000 that met the 1031 exchange rules. To provide flexibility to the borrower during the transition, the transaction was designed as interest-only for one year and then converted to a fully amortizing loan.