1031 into an investment property you already own?

Question

Scenario: buying a 400K SFH that was already doing a decent airbnb business. Possibly selling a townhouse with HOA issues that will leave me with some profit. If townhouse sells after the airbnb property, can I 1031 exchange the townhouse funds into the the SFH?

both properties are alike in price but the airbnb property is less expensive by 40-60 thousand. "IF' you can do the exchange in this scenario where do the funds have to go?

-Pay down principal? Upgrades? or just into the bank account of the property?

Thanks to all in advance!!!

Dave Foster · Answer

@Edward Acker, Not directly. You have to close the sale of your old property before you take title to your new property in a 1031 exchange.

There is a process called a reverse exchange where we as the qualified intermediary take title to the new property before you do. And then we can hold it for. up to 180 days. While your old property closes. But you have to provide the money to buy the property. And they are pretty expensive.

I'd first talk to the Air bnb seller and see if they can wait a bit. Even if it meant putting more earnest money down. Or leasing it from them for a little bit until the old property closees.

Bill B. · Answer

Don’t forget, that 40-60k less that the new property is worth will also be taxed. So make sure you’re deferring taxes on quite a bit more than that.

1031 into an investment property you already own?

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