Partial 1031 Exchange

[Kelley Cock]

We are very novice investors. We turned a primary home into a rental 8 years ago because we wanted a bigger home and didn't want to sell during a downturn in the market. We would now like to sell our rental and reinvest in a home in the mountains that we would use as a STR and a vacation place for our family. Our basis is pretty low since the marKet was so low when we converted it to a rental so we will, of course be looking at paying a boat load of capital gains.

Ideally, we would like to keep some cash back In the exchange and have less invested and Less mortgaged in this property. I’m a little unclear on exactly what has to be satisfied on a partial exchange. Can we finance less AND purchase a property that costs less thus having cash and less money in the new home? Or can we only choose one rule to not satisfy...for example, only keep cash back or only purchase for less than our current home sells etc. I know we pay taxes on any of the difference. 

If there is a better way to think about ending up with less "in" on the investment property, we're certainly open to ideas. We are so used to having what feels like guaranteed money each month from our LTR that we are managing fear of the unknown on the STR side.

Thanks so much for any advice. Like I said, we are as novice as you can get  and I have really appreciated the insane amount of information in these forums. 

Kelley