My first 1031 exchange - has anyone tried including rehab costs?

[Gordon Starr]

Hi BP!

I have been growing my portfolio of six houses and a duplex by around one house per year and I like to deal in cash with no mortgage. Problem is, I am a bit short on ready cash to continue growing. This forces me to sell (which I didn't really want to do). I have chosen a sell one, buy two strategy where I sell one of the more valuable houses and buy two houses that need rehab or a duplex needing rehab. Because I do most of my own rehabbing, my tax basis in these places is very low, so I am up against a serious tax burden when I sell.

I would love to hear from folks who have experience with the 1031 exchange. I have the sale set with my tenants buying that will net me 37k and want to purchase a duplex needing work for 24k. I could easily use up all the 37k (and maybe more) proceeds in the rehab of the duplex. Most of the info I have read does mention you can include rehab costs in the 1031 exchange. Sounds great, but reading about it and doing it are two different things.. Has anyone tried this? Thanks in advance for your input.

Gordon