1031 exchange

[George Wolff]

In order to do a 1031 exchange do you have to reinvest the total amount that you sold your property for?

[Dave Foster]

@George Wolff,  No, you do not have to reinvest the entire amount of your sale - if you're willing to incur some recognized taxable gain.  "Partial exchanges" are very common and can be very useful to investors With large gain and equity positions who are strapped for cash.  

In order to fully defer all tax you must purchase at least as much as you sold (net sale before mortgage pay off) and you must use all the net proceeds in the next purchase or purchases.  Any amount you purchase less than what you sell or any cash you take out is viewed as gain and is taxable but the remainder of the gain can stay in the exchange tax deferred. An example would be if you made 100k on a sale and wanted to keep 20k in cash for some reason.  You can do this and you would shelter 80k in gain and pay tax on only the 20k

One option that might be more appealing to you would be to complete a full 1031 exchange thus deferring all tax.  But then do a cash out refinance of your replacement property for the cash you need.  This would not trigger a tax event.