1031 exchange - loan amount rule

[Susan O.]

Hi for the loan amount rule if I potentially have to make an all cash offer to get a deal would it make sense to get Private money then it will comply with the 1031 exchange 'same amount of loan' rule??

This is the scenario

I have a 1031 exchange

Downleg property $1m sales price and had a 50% loan $500k or 50% LTV

My upleg property the seller wants 'all cash, and short period to close.  So I'm guessing I can't just put $1m of my own cash down right?

Will it be ok to do 50% Private money or bridgeloan? for the $500k LTV 1031 requirement?

Then in a couple months I can then Refinance? When I refinance later do i have to again keep the same 50% LTV?

[Dave Foster]

@Susan O., There is no "Loan amount rule" with the 1031.  The two requirements to defer all tax are to

1. Purchase at least as much as your net sale ( $1 mil)

and

2. Use all of the proceeds in the purchase or purchases ($500K)

Most folks don't have cash resources to replace the loan so they take out a similar loan amount.  But it is not a rule.

You can add your own proceeds and make purchase in cash.