What are my options with this 1031???
My husband and I intended to do a reverse 1031/investment exchange that has gotten a little too complicated. We've identified the replacement property, to make the numbers easy costing $300,000. We plan to live on it as well but not sure of the timing of building on the 9 acres. Ultimately a house and garage for us, rental cabins for the investment portion. I would guess not more than 1/3 for primary residence. Initially a garage with a living area that will house both rental and personal items. We think we will build rental cabins next and a house later but we might just keep living in the garage area for an extended period of time. Closing end of October/beginning of November. One question is valuation of investment versus residence (how does the caretaker quarters come in to play?) but first...
We plan to sell a relinquished property worth about $350,000 some time after the closing on the replacement property. We were going to do improvements in the 180 days to use try to up the full $350,000 some of which depends how much of the garage can be considered improvements and how much of the land as the investment was used up with the $300,000 purchase price. I now learn (maybe I'm using the wrong 1031 exchange company...) that the credit union I planned to use for the loan with 20% down is not likely to get involved in an exchange like this. I just reached out to my lender today. I am considering my options for the best tax strategy and don't have time to waste! We stand to "save" about $75,000 in taxes from both the deferred capital gains taxes and the avoiding the increase in healthcare tax etc with our income pushed $350,000 higher for the tax year.
I understand the easiest solution to my possible lender problem is to pay cash for the replacement property. We have no mortgage on our primary residence or the relinquished property. We have assets that we do not want to liquidate. So we have wealth, but not cash. What are other options? My husband threw out home equity loan (house worth $400-450,000) to fund the replacement property, to be paid off upon sale of the relinquished property. I have no idea how viable a strategy that could be. We could probably get $120,00 in cash from our parents combined. Perhaps just paying the taxes on the sale of the relinquished property is the best option. Any ideas? Other information you need to be able to help me? Who is the best professional to help me sort through all of this?
Thank you!