Do I always have to sell the property to do a 1031 exchange?

[Justin Ashworth]

I have a rental property for which I have 8 years left on a 15 year mortgage. I'd like to refinance it to 30 years and pull cash out to where I only retain 20-25% equity, to gain maximum leverage. I would use the money I pulled out to purchase additional properties. Is this even possible to do under 1031 rules, or must I completely sell the current property to do a 1031 exchange?

Thanks!

Justin

[Cason Acor]

You must sell the property to do a 1031 exchange. I also don’t see how a 1031 exchange would benefit you in your scenario, because you don’t pay capital gains tax when you refinance a property.