1031 Exchange into a Refinance

[Shawn Donnell]

I’m looking at getting two investment properties to buy and hold for a few years then sell with the intent of utilizing the 1031 exchange program. What I’m trying to figure out is if I can refinance my personal residence with the 1031 funds when the investment properties are sold? That way it reduces what I will owe at that point and then I can move and rent my current residence reasonably within what a tenant can pay versus the inflated market we currently have.

[Account Closed]

Residential properties, inventory, securities, trust certificates, corporate stock, or partnership interests cannot be exchanged under Section 1031 Internal Revenue Code, 26 U.S.C. § 1031. Profits from commercial properties can move from one investment to the next, so long as the like-kind exchanges continue.

Like-kind exchanges only apply to investment and business property and trades are fairly relaxed. By definition a like-kind real property exchange involves a trade of real properties within the United States that are the same in nature or character, even if they have different qualities.