1031 Ex - paying for closing and rehab

[Levi K.]

Hello BP community,

Happy New 2014 Year!

Here what I have been thinking of:

I want to do 1031 ex on my 1bd/1bt condo. Can I use the money to:

1) buy the new property

2) pay for closing

3) and pay for renovation

Basically, I do not have money of my own (in saving) to spend on at all for closing cost, renovation....etc

Hope the question make sense!

Thank you,

Levi

[Bill Exeter]

Hi Levi,

Yes, it can be done.  It is referred to as a Build-To-Suit 1031 Exchange (also known as Improvement 1031 Exchange or Construction 1031 Exchange).  Your 1031 Exchange proceeds can be used to acquire the replacement property, pay for "routine purchase costs" such as broker's commission, escrow fees, recording fees, exchange fees, etc., and capital improvements.  Repairs and maintenance do not typically qualify unless they are part of capital improvements.  Improvement 1031 Exchanges are more complicated and more expensive.