Help me understand depreciation for a 1031 Exchange

[Rachel Kokosenski]

Hi. I'm contemplating doing a 1031 exchange on an SFR and using the proceeds to buy a vacation condo that I will do STR's on for at least 3/4 of the year. I do intend to use the property for a few weeks of the year myself, but it is definitely an investment property. I need some help understanding how much money I am going to have from the proceeds of the sale of my SFR, in regard to depreciation. Here are the details:

Property was purchased in 2018 for $59,900.

Owe $44,000 on mortgage.

Realtor said it could sell for $80-85,000 right now.

(Had a Cost Seg Study done on the property, but I'm not sure what number(s) you need me to provide from it; please advise and I'll provide the information you need.)

I understand the rest of the 1031 Exchange process, but I'm confused about how to factor the depreciation in so that I have a better understanding of what amount I can use to purchase the vacation condo. Thanks!

[Dave Foster]

@Rachel Kokosenski, And as long as you also use all of the cash proceeds in the purchase as well you're golden as far as valuation goes.  Remember you have to use a QI and have them in place prior to the closing of the sale.  And they'll guide you through the maze of regulations.