Convert 6 unit multifamily into condos and 1031 individual units

Flipper/Rehabber · springfield, PA · Member since 2016 · 11 posts · 4 votes

I bought 6 unit property in Wildwood,NJ,

in November 2024, doing rehab now, should be done by May 2025

I am planning to subdivide 6 unit building to 6 separate condos and sell fall 2026, , if there are any experts in 1031 that can help me?!

planning to list them for 2024 taxes as 6 different properties and when rehab will be done , I will get all 6 deeds,
can I sell individual condo and 1031 based on basis I will show?
Real numbers- purchase 907k,

rehab , closing costs, soft costs, 840k, all in 1.747 mil, basis for each unit should be roughly 291k

appraisal of each unit minimum 400k , so 2.4 mil if for all 6.

I might refi only 4 out of 6, that will cover initial loan amount.

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Ben TrageserPro Member
Accountant · Montclair, NJ · Member since 2020 · 218 posts · 104 votes
1y
Hi Ilia - Whitney Nash could help you out. I'll send you her contact information.
[email protected]
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Jim Given
Member since 2020 · 16 posts · 4 votes
7mo
@Ilia....how did this work out?
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- Ilia Zakharav
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  Flipper/Rehabber · springfield, PA · Member since 2016 · 11 posts · 4 votes
  7mo
  Quote from @Jim Given:
  
  @Ilia....how did this work out?
  
  End up not doing 1031,
  But certainly fan separate basis and sell individually and do 1031 on each condo
  As long as basis is separate on tax returns
  0 Reply
Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
7mo
@Ilia Zakharav, Generally a legal separation into individual units does not constitute a change from property held for investment and property you intend to hold. a legal separatiion simply indicates your rights for the property you have. When you turn a shovel - like putting infrastructure in or driveways to separate lots, that is when the IRS will sometimes say you are a builder developer and you can't do a 1031 immediately. Changing the legal rights generally doesn't disqualify for 1031 purposes.
When you separated those units into individual addresses your accountant would have reclassified the basis into each one as appropriate. When you sell one it's basis is whatever was allocated as part of the division. And each basis is what is used for the 1031.
It sounds like this will work out for you very well.
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Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
5mo
This is an older post but to add a pov from the tax side

Buy a property and immediately rehabbing/diving and selling it would be a hard argument it was bought as an investment and not as a flip.
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