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Updated almost 7 years ago,
1031 Questions - Raleigh, NC
Hi BPers,
I have an investment property in Raleigh, NC (that used to be my primary residence). It turned into an investment property when my job took me out of state, it was not initially purchased as an investment property. Initially I thought it was a "good" investment property (i.e. the rent is more than the mortgage payment), but recently I've learned that I'm pretty much making $0.00/ month (rent minus mortgage, PM fees, taxes/ insurance, HOA, CapEx, vacancy, etc.). So I want to "swap" this property for a more cash flow positive property. The market in Raleigh is hot now so I think now is a good time to sell. My series of questions start here:
a) Is 1031 even appropriate here? I know that 1031 is intended for investment properties, since I used to live there can I count it more as "live in flip" and not pay capital gains on the appreciation? (appreciation is about $30-35k)
b) Can I use a 1031 to "swap" my one property for 2 new properties? (my goal with this strategy would be to get 2 properties generating more cash flow for about the same debt level I currently have, using my equity/ appreciation for a down payment on the 2 new properties.)
c) I think I've heard that the new property need to be more expensive than the one you are getting out of. Is this true?
d) If the property (ies) I'm looking at are foreclosures is that advisable? (I know there is a limited window which the new property must be under contract and foreclosures can by a headache)
Thanks in advance for your advice.