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1031 Exchanges

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Leo B.
  • Investor
  • Hercules, CA
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208
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Requirements for 1031 Exchange

Leo B.
  • Investor
  • Hercules, CA
Posted May 29 2015, 12:34

From what I understand the two basic requirements for a 1031 exchange are the following:

1. Use all net proceeds from sale into another investment property

2. Subsequent property must be of equal value to the net sale of the previous property

My question was around the value of the next property.  How is the value determined in order to meet this requirement?  Is it verified with the appraisal?  Or does the purchase price of the next property have to equal the net sale price of the previous property?

For example,

Old property

- 500K sold price

- 100K net proceeds after closing costs and mortgage payoff

New property

- 500K appraised amount

- 400K purchase price

- 100K down payment

- 300K loan

Would the above example qualify for a 1031 exchange?

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