1031 exchange one property into multiple properties.

[Brant Richardson]

I will eventually inherit a house worth 700k which is owned free and clear. I would like to use the money as capital to buy many financed properties worth 100-150k each, so we are talking about making a lot of deals. There's no way I could possibly identify that many properties in 45 days.

Could I refinance the property and pull out 80% of the money and invest it at my leisure, then sell it and use the other 20% to conform to the 45/180 day rules?

Or maybe sell then buy the new properties with all cash and refinance later for further acquisitions.

Are there any tricks like that for extending my time to use all the money?

I know it would be easier to buy one large multifamily but I don't want to do that.

[Bill Exeter]

Hi Brant,

Ellis has a great suggestion there. You will likely receive a "step-up in cost basis" when you inherit the property. This means that the capital gain and depreciation recapture will completely go away. You can sell the property immediately after you inherit it with no capital gain or depreciation recapture taxes to worry about, and therefore will not need to worry about structuring a 1031 Exchange transaction. I would verify with your CPA that you will receive a step-up in cost basis when you inherit the property and then plan accordingly.