1031 Exchange Question

I am considering selling my 4 unit property and taking the proceeds and investing them in townhouses and condos for rental due to the easier property mgmt associated to these types of properties. My question is this, if I execute a 1031 exchange, can I use the proceeds to purchase 2 or 3 lesser valued properties as long as I meet the 45 day discovery and 180 close rules? The cumulative value of the 2 or 3 properties will exceed the value of the mutlifamily and I intend to hold the properties for rental. Thanks.

Comments(3)

  • NewKidInTown312th January, 2006

    Yes, your proposal can be accomplished under a 1031 exchange.

  • eci16th January, 2006

    Of the basic requirements regarding a 1031 like-kind property exchange, this part/requirement is the only one that can be "fudged". You should realize that in order to completely defer all of your gains your reinvestment goal should be all of your cash and the debt figures combined - i.e. equal or up. Otherwise you will pay taxes on the difference.

    Short answer is yes, you can do it. However, be prepared to pay taxes on the difference of equal or up! Way to go using the 1031!
    Cheers,
    Ron

  • rborthwick17th January, 2006

    Thanks for the responses. Are you eligible for a 1031 exchange if you have not owned the property you will be exchanging for at least a year?

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