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Updated over 4 years ago on . Most recent reply

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Nick Donato
  • Investor
  • Denver, CO
2
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Using 10.31 funds to purchase a BRRRR is this possible?

Nick Donato
  • Investor
  • Denver, CO
Posted

I'm selling a rental I've had for several years now and will profit over $200,000.  In addition I have some cheap private money allowing to make a purchase in the realm of $500,000 cash. 

My plan is to sell this property --> buy a property with the intention of BRRRRing while using the 10.31 funds from the sale of the first property. 

In theory this makes sense to me but I'm not sure it abides by the 10.31 rules. Unfortunately the 10.31 experts want me to speak to a CPA of which I don't have currently.

Do I need to wait a certain amount of time to refinance the property due to 10.31 rules? Or is this a viable option? Anyone done this before? or is there any CPA's that can help?

thank you

 

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Dave Foster
#1 1031 Exchanges Contributor
  • Qualified Intermediary for 1031 Exchanges
  • St. Petersburg, FL
9,363
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8,993
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Dave Foster
#1 1031 Exchanges Contributor
  • Qualified Intermediary for 1031 Exchanges
  • St. Petersburg, FL
Replied

Hi @Nick Donato, I see a pm from you that I'll look at in a moment.  But both @Linda Weygant and @Taylor L. are right on.  Your scenario would be perfect.  

The only real question you've got is how long before you can do the "r"refinance.  In the industry the joke used to be "long enough to put the pen down from signing closing papers and pick up a new pen for the refinance!!

The IRS is very skittish and skeptical about refinances down right before a sale and 1031. They tend to see these as a way of accessing profit out of a 1031 exchange. However there's no such concern when done after a 1031. Because when you do a 1031 after a purchase you can't be seen as taking profit - you are accessing equity by borrowing against it and paying interest. So I wouldn't have a lot of concern over a BRRR with a refinance after ward. You're going to need 6 months anyway if you want to capture any forced appreciation.


Great pla!!!

  • Dave Foster
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The 1031 Investor
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