An apartment building bought under a Florida exchange deadline can look like a clean income stream on the offering memorandum and still hide a roof near the end of its insurable life, a rent roll padded with concessions, or a reserve account that was never funded. The federal exchange rules do not evaluate any of that. Section 1031 asks whether the relinquished and replacement properties are both held for investment or business use and whether identification and closing happen inside the 45-day and 180-day windows; it says nothing about whether the building you are buying can actually carry its debt.
Florida adds its own layer on top of the federal mechanics. There is no state individual income tax on the deferred gain, but documentary stamp tax applies to the deed and, separately, to any note secured by Florida real property, and both amounts belong in the closing model before equity is committed.
Treat the rent roll, the insurance file, and the capital plan as the real underwriting, with the exchange timeline as the constraint that decides how much diligence time is available.
Ask for the last twelve months of bank statements alongside the rent roll and match unit-by-unit deposits against stated rent, concessions, and delinquency. A rent roll prepared for marketing can show gross potential rent while the deposits show months of partial payment or vacancy.
Confirm which units are month-to-month, which leases expire in the next two exchange cycles' worth of ownership, and whether any renewal has already priced in a jump the current tenant has not agreed to. Separately verify security deposit records against the ledger, since a shortfall here becomes the buyer's liability at every future move-out.
Florida apartment insurance has moved sharply in the last several years, and a seller's existing premium on an older policy tells you little about what a buyer will pay. Request an actual quote using the buyer's intended coverage limits, wind mitigation inspection, and current carrier appetite for the building's age and construction type.
Where the property sits in a flood zone, confirm whether flood coverage is separate from the wind and property policy and whether the lender will require limits above the standard NFIP cap.
Pull permit history, the most recent roof inspection, and any wind-mitigation report, and compare stated roof age against what the carrier and lender will treat as remaining useful life. An older roof can still be insurable, but often only at a higher deductible or with an exclusion that shifts wind risk back onto ownership.
Walk stairwells, walkways, and railings looking for corrosion and spalling concrete, which are common in coastal Florida buildings and expensive to defer.
Property tax reassessment at sale, a new insurance premium, and a fully staffed management contract frequently push the buyer's expense ratio above the seller's trailing twelve months. Rebuild the pro forma from the buyer's actual expected costs rather than adopting the offering memorandum's projected expenses.
Confirm whether utilities are submetered or included in rent, since Florida's utility costs and the building's billing method materially affect net income. A reserve line that never appeared in the seller's operating statement should still appear in the buyer's, particularly for a building with an aging roof or dated mechanical systems.
Multifamily lenders typically require a full appraisal, physical needs assessment, and environmental screen before funding, and any of those can extend past a compressed identification window if ordered late. Order lender-required reports as soon as a property is identified rather than waiting for full loan approval.
Where identification includes more than one candidate property, rank them by financing certainty as well as price, since a deal that cannot close inside 180 days defeats the exchange regardless of how well it underwrites. Build in a buffer for a second lender opinion if the first comes back with a condition that affects proceeds.
