Wholesale profits = Down payments?

[Ryan Dossey]

Those of you guys that have been at this awhile talk to me.... Is it a bad idea to use wholesale profits to pay for down payments on rental properties. Obviously one would need some cash reserves ICE. But are there any reasons why this is a bad strategy to employ? I heard about it on one of the podcasts. Could you roll over wholesale profits to a 1031 so you don't have to pay capital gains? Who has used this strategy? 

[Bill Exeter]

Hi Ryan,

The properties involved in a 1031 Exchange must be held for rental, investment or use in a business.  Wholesaling, rehabbing, flipping, etc., involve properties that were held for sale and were not held for investment and therefore will  not qualify for tax-deferred exchange treatment under Section 1031.