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/