Selling rental to children for 1031 exchange

[Derwin Villanueva]

Aloha BP'rs,

My wife and I have our son and his family in our rental, which he wants to stay in, and we want to do a 1031 exchange into higher performing assets. The home here on O'ahu has a FMV of about $900k~, a $405k mortgage @5.3%. They had the rent covered up until our oldest son that shared rent, his brother, passed away in August. They have never owned a home. He wants to stay in the house and we, of course as doting parents, do not want to sell to him at the market rate. We are thinking to sell it to them at $650k.

What ideas/considerations do any of you with your collective base recommend to make this happen? Are there better alternatives to conduct the 1031?