121 and 1031 multifamily question

3 Replies

Hey guys, I bought my home for $550k its a 3 unit multifamily and I plan on selling for $800k.  My tax person splits it 50/50 due to sq footage.  So my gains will be about $250k, which from what I understand i can do a 121 for $125k and 1031 for the other $125k.  

My question is, since I am only using half for 1031 do I have to find another property that is $800k or can I find a property for $400k or 2 $200k or 4 $100k properties?  

Also If the latter applies from my previous question, after I acquired a new property(s) can I refinance or get a HELOC to get money out? And how soon can I do it? For example (not including closing cost) I could only find 1 $400k property within the 45 days. I put in the $125k giving me 31% equity. I refinance or get a HELOC to get it down to 20% equity ($80k) and later find another property for $225k to put down the remainder $45k as a 20% downpayment.

@Royce Talbo , You've just about got it.  Your 1031 will have the reinvestment requirements only for the investment portion being sold.  In order to defer all tax you'll need to purchase at least $400K. Yes that can be split up however you want it on multiple investment properties.  

And yes, if you can only find one property to satisfy your 1031 in the time constraints you can purchase it and after the fact refinance and use the refi to buy more real estate - this time without the time constraints of the 1031.  The only downside to this is the cost of the refi vs simply purchasing the new properties all at once.

Well thought out!!!

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