1031 Exchange Down Payment Purchase

2 Replies

Hello - I am looking to do a 1031 Exchange and utilize all of the proceeds from the sale as a down payment on several new properties. Is this possible or will the new properties have to be paid in full, all cash? 

Example: I sell Property A for $1MM. Then I use the proceeds as 5 separate down payments of $200K for properties B,C,D,E, and F respectively. 

Please let me know and thank you in advance. 

@Bazl Taliaferrow , Two requirements regarding the money.  In order to fully defer all tax you must...

1. Purchase at least as much as your net sale (contract price minus closing costs and commissions)

2. Use all of the proceeds in the next purchase or purchases. You can allocate them in any manner you choose to any properties you are purchasing.

That your describing is perfectly fine.  the challenge of course is going to be to find the right replacements and fit into the identification calendar as well as the potential nightmare for funding approval given the moving pieces.

If that proves daunting you could also think about buying one or two properties for cash and then refinancing them immediately after the 1031 to access the money for the next two.

And yet another option that a lot of our clients are choosing these days is to separate the cash and debt as a form of defensive investing.  Purchase one property say $500K for cash.  And then use the other $500K as down payments on properties.  This gives you a fall back and let's you "rathole" that $500K from the bank.  But still lets you take advantage of the roi scale of leverage (and risk) with the other properties.

Yes there is a way to do so. I filled out a contact form on your Keller Williams site with some explanation.

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