1031 exchange questions

[Gary Gristick]

Hi all, 

I have some questions about a 1031 exchange, see below. 

Sell investment property - $700,000

1031 purchase property $700,000

Are there any restrictions on pulling money out of the new 1031 purchased property? I am looking to 1031 into a 7 unit, since it will paid for after the exchange I wanted to then get a mortgage on it and pull the money out. Since the taxes are being deferred, I didn't know if there is any issue or if you are allowed to do a cash out refi on the new investment property via the 1031 exchange? 

[Bill B.]

So you’re selling a paid off $700k NET (after all selling costs you will deposit $700k with the QI) and you’re buying a property that will cost you $700k net (mostly list price but a few added costs)?

if so…. 

You can’t keep any cash from the sale or you will be taxed.  You can’t/shouldn’t do a cash out refi before the exchange (the IRS isn’t a fan). I believe you are fine doing one after the exchange is 100% complete.