10-31 Title Exchange

[Trevor Larsen]

Can you use the money from a 10-31 tax exchange to pay off the loans on existing mortgages? Seems like it would be a good way to increase cash flows while scaling down a portfolio so you could hold fewer properties as you get older and have higher cash flows but still defeating tax if it’s allowed

[Dave Foster]

@Trevor Larsen , Unfortunately you can't use the replacement side of a 1031 to pay down mortgages on existing property.  That would work pretty slick.  But only new purchases of actual investment property qualify as replacement properties in a 1031 exchange.  

What you can do is use your equity creatively to restructure debt so give you better cash flow.  Complete the 1031 and then look at your debt profile, property performance, and ROIs for all.   Maybe a strategic refi is in order after the fact.