1031 Exchange to Seller Financing

[Dominique Coffin]

Looking for some insight on the topic of doing a 1031 exchange into properties that the owner would want to do seller financing. Does anyone have any experience in this? Looking for certain things I need to watch out for or any advice that would help. Thanks in advance!

[Dave Foster]

@Dominique Coffin, The seller finance acts just like a loan from any other source.  You're just borrowing from the seller instead of the bank.  Like @Bill B. said, as long as you are purchasing at least as much as your net sale.  And you are using all of the proceeds from your sale as the down payment you will defer all tax.

On the other hand - if you're wanting to sell your property and carry the note back as seller financing to the buyer you will either pay the tax on the note (but it will be an installment sale and so the tax will be spread out).  Or you will have to have cash to replace the note in your exchange account.  So you can move forward with all cash.