reinvestment goal for 1031 exhange

Member since 2022 · 7 posts · 3 votes

Hi,

I am looking to do a 1031 exchange and am wondering what is the amount of the house I would have to buy to hit my reinvestment goal for the 1031 exchange.

the current property:

purchase price $515,000

sell price :$660,000

principle balance: $383,700

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Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

@Zachary Rosa, In order to defer all tax you must do two things. First you must purchase at least as your net sale. Second you must use all of the net proceeds from your sale in the purchase or purchases.

Your net sale will be the sales price of $660K minus any closing costs or commissions. If it's a normal sale you'll end up with a net sale of around $630K.

Your net proceeds will be the net sale minus the mortgage pay off. So, $630K minus $384 = $246.

Your reinvestment target to defer all tax would be to purchase at least $630K of real estate using $246 of cash.

You can purchase less than your sale. And you can take cash out. But when you do the IRS considers that taking profit. So you pay tax on the difference. But shelter any remaining profit that is left.

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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
4y
@Zachary Rosa, In order to defer all tax you must do two things. First you must purchase at least as your net sale. Second you must use all of the net proceeds from your sale in the purchase or purchases.
Your net sale will be the sales price of $660K minus any closing costs or commissions. If it's a normal sale you'll end up with a net sale of around $630K.
Your net proceeds will be the net sale minus the mortgage pay off. So, $630K minus $384 = $246.
Your reinvestment target to defer all tax would be to purchase at least $630K of real estate using $246 of cash.
You can purchase less than your sale. And you can take cash out. But when you do the IRS considers that taking profit. So you pay tax on the difference. But shelter any remaining profit that is left.
The 1031 Investor5137 Reviews
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Zachary Rosa
OP
Member since 2022 · 7 posts · 3 votes
4y
awesome! thank you very much.
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Zachary Rosa
OP
Member since 2022 · 7 posts · 3 votes
4y
just for the sake of asking, could I use that $246k to buy 2 properties or is a 1031 only a 1 property for 1 property swap?
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
4y
The number of properties doesn't matter. It's the aggregate total that needs to equal or exceed your net sale if you want to defer all tax. You can allocate your proceeds any way you want. Pay cash for one and leverage one. Doesn't matter.
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Account Closed
Manhattan Beach, CA · Member since 2021 · 76 posts · 40 votes
4y
It would be your net!
$630,000 sale price - $384,000 mortgage pay off = $246,000. You would need to buy/invest in real estate worth $630,000 with the $246,000 net. If you don't use the full $246,000, you would have "boot" that would be taxed unless you buy real estate or invest in a DST.
I'll PM you :)
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