Newbie house hack advice

[David Asche]

Hi, I have a unique situation and would appreciate some advice.

I have been renting a house in Idaho for the last two years with an option to buy house for 151k at anytime within the next three years.

My realtor thinks the house should sell for 230k.

My goal is to house hack with a duplex.

My questions are: 1. Can I somehow buy the house with no money down at 151k (I don’t have enough savings for down payment, closing costs, etc)

2. After buying it can I use equity to pay for a 1041 exchange into a duplex valued at 230k, thereby keeping my 151k morgage.

3. If not can I sell it with no capital gains tax because it was my primary residence for the last two years while renting (not owning). Then use the gains as a down payment on a duplex.

Appreciate any advice or ideas anyone may have.

[Don Spafford]

@David AscheSounds like you've got a great situation. I would definitely take the option to buy and hopefully you can find a bank that would count the equity value as your down payment to not need any money out of pocket. But instead of selling to 1031 you can either with the purchase/refi, possibly pull some money out at that time to use and therefore also keep that house to live in while you search for something and then keep it to rent out as well. Or buy the house and then get a heloc on the equity value to use that to purchase another property. I am not a CPA or attorney but I would suspect that since you did not buy it, two year ago, even though it is your residence you did not own it and therefore it you buy it and then sell it, you would not get the favorable tax treatment.