1031 Exchange - Financing Restrictions on Higher Value Property

[Vin Soando]

About to do our first 1031 exchange and trying to understand if there are any restrictions on financing when purchasing a replacement property above the relinquished property price.

Here is our scenario - Selling property at 350K with 210 in equity and 140K debt. Basically a 40:60 debt to equity ratio.

Do we need to maintain that debt to equity ratio when purchasing a replacement property above 350k?

For example, if purchasing a 700K replacement property could the 210K equity be used as a 30% down payment and finance 100% of the 490K balance?  Or would we need to maintain the 40:60 ratio and bring in 210K of cash resulting in 410k equity and a 280K mortgage?

[Bill B.]

You need to reinvest all the “cash” you receive. If you received $210k in cash after selling costs and someone would sell you a $10million apartment building with $210k down you would be fine. 

Ps. Of course I don’t mean you receive as the 1031 QI has to receive the money, once you have control over the money it’s too late for a 1031.