1031 Exchange Question

[Dustin Dummer]

I found an interesting deal for a lake home that could serve as a primary home with 2 apartments below. I’m considering purchase options. 

Option 1 - I can sell my primary home and purchase the lake home.

Option 2 - Can I sell a duplex using 1031 exchange to purchase the lake home? Again top floor would be primary residence, bottom rentals. Is this permitted under 1031? This would free up the money from the sale of my  current home and allow it to be rented.

[Bill B.]

If you’re investment property is worth less than the rental portion of the lake home (pry go by square feet, so maybe half?) then yes you could exchange for that half. 

You can’t move in to your current rental and sell in 2 years tax free any more, that would be prorated, so pry not worth doing. 

You could sell your primary tax free (always better than tax deferred) then you could get a bette rate on the loan as you’re buying a primary. Uo to you if you dislike your primary or your current duplex more. You could even sell them both of the rental half of the lake home is worth more than your duplex.