So I have a SFR I have been renting for 9 yrs with $100K equity in Florida. I am prepping to list it for sale next week. I am considering doing a 1031 exchange for two properties (1) a SFR ($230Kish) I will turn to a shor term rental (STR) and (2) about 27 acres ($200K) of raw timber land I would subdivide and develop into more SFR-STRs within the next three years. The question I have is this:
With about $70K in tax depreciation, can I put all the deferment from the property being sold on the SFR being purchased since it has a building and still use the remaining proceeds from the sale in the 1031 Exchange to buy the land?
Spelled out more clearly:
1. Sell SFR with $100K equity
2. Utilize 1031 Exchange
3. Purchase unit 1 (SFR) at $230K with $46K down from 1031 Exchange financing the remainder. Apply 100% of the depreciation to this unit from sold home ($70K).
4. Purchase Land at $200K utilizing the remaing $54K from the 1031 Exchange. No depreciation applied from prior sale.
(The properties I would be purchasing are from different owners.)
I am appreciate and look foward to your input.
Chris, you say you have $100K equity but you don't mention how much gain you have.
Unfortunately there is no gain as I bought it in 2006 in Florida. It is finaly back to original purchase price. I am seeking to avoid taxes on the depreciation I have taken over the years.
@Chris Watson , Since your basis both adjusted and depreciable carry forward in a 1031 you will be able to take advantage of whatever depreciable basis is left as long as your purchase of depreciable property supports that number. the depreciable basis left can be applied against the structure of the first rental. And of course don't forget that over the next few years you'll be adding to that depreciable basis as you develop and put the new assets into production.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.