1031 Creative Use of Funds

[Terrence Bayly]

I am in the process of acquiring a replacement property through a 1031 exchange. Fortuitously the replacement property has a separated basement unit that could be finished to make a second rentable unit. Is there a creative way to use my 1031 funds to finish the basement unit. 

I have $130k in 1031 funds being held by my QI. $80k will go towards acquisition of the replacement property. To avoid boot I was hoping to use the remaining $50k towards the basement unit. Is this possible rather than be left with boot or look for a second replacement property? 

[Terrence Bayly]

@DaveFoster thanks for the reply. My QI is looking into the possibility of a construction escrow. I know they are in charge of decision making, just curious if people have done something similar to what I am looking to do.