MHP Seller financing & 1031 exchange.

[Ingrid J.]

Hello,

I am looking into seller financing for purchasing a mobile home park, and I have a question I can't find the answer to.

What happens if I buy a mobile home park from a seller through seller financing. Let's say I do a value-add and five years later want to do a 1031 exchange into something bigger. We are assuming I am still paying the seller through the loan he/she gave me.

First of all, what happens to the seller who gave me seller financing? I want to make sure the seller who's been graceful and has taken a chance on me by providing me seller financing doesn't get punished down the line with taxes. 

And secondly is it possible to do a 1031 exchange it if I want to roll into a bigger park, or even an apartment complex? 

Thanks a lot on your input. Highly appreciated.

[Dave Foster]

@Ingrid J., from your perspective it's nothing any different from any other loan that has to be paid off in order for you to sell.  That also means then that the original seller who carried your loan will be paid in full upon your sale.  So the tax that they had been spreading out over the life of the note would then be due in full because you paid them in full.  That may or may not be an issue for them.  Probably a good discussion point in negotiation.

Yes you can 1031 exchange from any type or size of investment real estate into any other type or size.  the reinvestment criteria insure that if you want to defer all tax you must purchase at least as much as you sell.