Selling an STR subject to while utilizing a 1031 exchange into a new investment

[Nathan S.]

I am looking into selling my STR in TX using "subject to the existing financing" while utilizing a 1031 exchange into a new investment in MN. Is that something that is even possible? If so, can additional funds be brought to the table to fund the new property's down payment? In the subject to contract, there would be a small down payment provided and then a typical amortization schedule afterward. I've got a great interest rate on the existing home and would love to leverage that for a higher price when selling. Thanks for any insight!

[Dave Foster]

@Nathan S., You can do that.  Your old property would be considered to be "sold" on the day of the execution of the contract.  The issue you'll have is that if you want to defer all tax you must purchase at least as much as your net sale.  And you have to use all of the proceeds from your sale in the purchase.  This might mean that there isn't much money that was put down by the buyer of your property.  So you would have to bring in additional money and lending to purchase your new property.

As long as the "benefits and burdens" of ownership have transferred to your buyer that would constitute a sale.  And you could do a 1031 exchange.