ADU potential, 1031?

[Dave Lawrence]

I have a handful of SFH rentals on the east coast that have seen some appreciation in recent years. Meanwhile I'm living and renting in SoCal (current place is well below market rates, as LL hasn't bumped rent in 5 years, and wife and I are very happy here). But I have had an eye towards house-hacking for some time. I have VA eligibility (and a 70% rating), and am interested in a home that has great ADU potential via a garage conversion.

I know 1031s can't be done on ADUs when the primary residence is already titled in your name, but can a 1031 be done while the transaction is in progress? Also: My fear is that, in order to do so, I would have to forgo the VA loan and go with a commercial product. Here's the link to the place I'm looking at.

Any thoughts?

https://www.zillow.com/homedetails/2139-Modoc-Rd-Santa-Barbara-CA-93101/15894086_zpid/

[Nabil Suleiman]

@Dave Lawrence

Is there anything stopping you from using the 1031's to invest in an investment property that cash flows more? I don't mean to dissuade you, but it seems like you have a pretty great deal where you are and you enjoy living there. Unless the property will reduce what your are paying now + the costs for building the ADU, it seems like either the investments you already have are great or maybe its time to sell and move up. I know that doesn't answer your 1031 question but just a few thoughts after reading your post.

Thank you for your service.