1031 partnership property

[Mike Reynolds]

Is it possible to do a 1031 on a partnered property if the new property is the same split? 

Can you use some of the proceeds for the down and some for the rehab? 

1031 is new to me. I have never done one.

[Dave Foster]

@Mike Reynolds, Yes it is possible to move a partnership forward into your next property using the 1031. The key is that whoever is the tax payer for the old property be the tax payer for the new property. So if the property is owned by an entity like an LLC or a limited partnership it is the tax payer for the property. It can sell, do the 1031, and buy the new property. The members of the LLC are just going along for the ride. It is the entity itself that is doing the exchange.

3 partners as tenants in common you have even more flexibility.  With tic ownership there are really three taxpayers.  Each one of you owns a property that is a% of a larger property.  When you sell that each one of you has the choice of what to do with your %.  All three of you could do one 1031 into a new property.  Or two of you could split off and do your own 1031 and the other person take cash and pay their tax.  Or each of you could split up and do your own 1031.

So for your first question it all depends on the ownership structure of the current property.

The 1031 can only be used for the purchase os actual real estate.  You can't exchange into improvements on property you already own.  So you can't complete a 1031 and then use the rest of the 1031 proceeds to improve the property.  It must be complete when you take title.  But there's a couple of ways you can work around this.

1. Negotiate improvements to be completed by the seller in exchange for a higher purchase price.  

2. Use a form of reverse exchange called an improvement exchange.  Instead of you taking title to the new property immediately your QI (the qualified intermediary who performs the 1031 for you) takes title to the new property and holds it while it is improved (maximum of 180 days).  Then once the improvements are complete you can take title to it to complete your exchange.  Pricier and more complex but improvement exchanges can be incredibly powerful tools when you've got the right value add property.  Particularly in your case if you've got the construction skills and background.

I'll PM you with some resources to learn about both.