Realestate Exchange Possible?
Is it possible to exchange 4 single family homes, 3 which have been converted to rentals,1 used as primary residence, for 1 super nice primary residence-if I can find a willing overextended seller?
Rental 1. value 300k, depreciation taken
12k over 5 yrs. (owned outright)
Rental 2. value 300k, depreciation taken
30k over 4 yrs (220k owed)
Rental 3. value 110k, depreciation taken
5k over 4 years (54k owed)
Primary value 350k (285k owed)
If I decide I want to get rid of the rentals could I structure an exchange for a hard to sell 700k single family? Options?
While I realize I am now holding 1 million plus in prime Michigan real estate going up in value 7-9%, I will eventually need exit plan. Figure 750k investment would be o.k. for last 10 years before I sell all and move to Tennessee with windfall.
Or should I hold this stuff as planned until it doubles, move back into each one for 2 years then move?
Sorry Medusa52,
Your primary residence is not eligible to participate in a 1031 exchange neither as the relinquished property nor as the replacement property.
Your three investment rental properties can be exchanged for other investment property, but not for your primary residence.
You must have the intent to hold your relinquished properties and your replacement property for income production (rental), investment or for use in your business. A primary residence will not qualify for 1031 exchange treatment.
If you have lived in your primary residence for at least 24 months out of the last 60 months, then you can take advantage of Section 121 of the Internal Revenue Code and sell your primary residence and exclude from income any capital gain up to $250K if single and $500K if married. You can use these proceeds to acquire another personal residence of course.
The rental properties could be sold and exchanged into another rental property, and then after renting the property for sometime you could convert the rental property to your personal residence and later take advantage of Section 121, as long as you have the initial intent to hold the property(ies) for income production and actually rent them for an adequate period of time.
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Bill Exeter[ Edited by wexeter on Date 08/22/2003 ]