All Forum Posts by: Celia Moore

If you would like to increase your portfolio by accumulating more properties, the cash-out refi is a great option to utilize the equity and keep growing. If you feel that you don’t care for one of your properties and want to sell it for something better, the 1031 will allow you to defer the tax upon sale. 

Please keep in mind to be fully tax-deferred with a 1031 exchange, you will need to purchase the next property at an equal or greater value than the property being sold and you will use 100% of the proceeds from the sale toward the replacement property! 

Here if you need any questions answered! 

1. You can do a 1031 exchange with the portion of your property that is allocated as investment property (the ADU/rental). The portion of the property that is your primary residence would not be eligible to exchange. However, if you have used it as your primary residence for at least 2 out of the last 5 years, you would be eligible for the Section 121 Universal Exclusion of gain for primary residence of up to $250K for an individual or $500K for a married couple filing jointly. The allocation percentages of primary residence versus investment property would be determined by you and your tax counsel.

2. There is no “2-year clock” in a 1031 exchange unless you are exchanging with a related party. The IRS code does not give specific holding periods to qualify for a 1031 so it is a gray area. Generally a holding period of at least one year is long enough to demonstrate your intent to hold that property as an investment (versus for resale) but it really comes down to what you and your tax counsel are comfortable with.

3. The length of rental periods would not affect a 1031 exchange. If your replacement property is another owner-occupied multi-unit property, again only the portion that is held as investment would be part of the 1031 exchange, while the portion that you live in would be treated as your primary residence.

A Reverse Exchange allows an investor to acquire a new property today and to sell the old property later. This greatly expands the ability of the investor to take advantage of changes in the marketplace and to improve his or her investment position. Although the Reverse Exchange has been used for decades, the Internal Revenue Service did not issue any guidelines until 2000 when they published Revenue Procedure 2000-37.

For a Reverse Exchange to be considered, it is necessary for the Exchangor to have the financial ability to purchase the target property while not yet having the proceeds from the future sale. The required down payment will be lent to the Exchange Accommodation Titleholder (EAT). This loan is typically repaid upon the sale of the Exchangor’s relinquished property.

If you were to rent out a portion of your primary residence for 3 years and then sell the property, you could do a 1031 exchange with the percentage of the property that is allocated as a rental. The percentage of the property allocated as your primary residence would still be treated as a primary residence upon sale, which would allow you to utilize the Section 121 universal exclusion of capital gains of $250,000 for an individual or $500,000 for a married couple filing jointly. You could not do a 1031 exchange for the whole property if you were using a portion as your primary residence.

Hi Jo! The short answer is no. In a contract for deed, the “sale” occurred when the contract began, not when it is paid off. Therefore, you cannot do a 1031 exchange for a balloon payoff on a sale that already occurred. Hope that helps!

Inland is huge in the DST space! Robert Smith of Peregrine Private Capital works for Inland and is the broker we use for our deals. He also has an immense video library on the topic: https://www.youtube.com/channe... 

Are there still opportunities to sponsor this event? @Alicia Marks

Excited for this! We will also have David Moore from our company speaking on utilizing 1031 exchanges in today's market 👏

Oh yeah...