Can I sell a fourplex and buy two more using 1031?

Question

I have the possibility to sell one of my Fourplexes that has the most equity and would like to buy two other Fourplexes with the proceeds of the fourplex sold.

My question is, can I do this transaction under the 1031 exchange?

Would I get hit on the taxes if I do this?

Has anyone else done this?

Carlos Gonzalez · Answer

@Alex Olson

Phoenix.

Carlos Gonzalez · Answer

@ryan thomas thanks for the explanation

Carlos Gonzalez · Answer

@Dave Foster alright, thank you for the explanation and for some strategies. I will reach out to you once i start doing this process. You can be my intermediary.

Dave Foster · Answer

@Carlos Gonzalez, @Ryan Thomas and @Stephen Kehoe nailed it.  As long as you purchase at least as much as your net sale and use all of the net proceeds in the purchases.  You'll defer all tax.

One other big opportunity - You can allocate your proceeds in any way you want.  So you can split the proceeds into two down payments.  Or you could purchase one with maximum or all cash.  And use maximum leverage and minimum down payment on the second.

Leaving a 1031 with a free and clear property and a heavily leveraged property is a great opportunity to take some risk off the table.  And that free and clear property is available at any time for a cash out refinance if you find another opportunity.  But the timelines of the 1031 don't affect it.

Ryan Thomas · Answer

@Carlos Gonzalez Yeah, no problem with that. As long as the combined value of the two purchases is greater than the one you sold and as long as you reinvest all the cash from the one you sold, you’ll defer all the cap gains.

Stephen Kehoe · Answer

You can identify more than one property for a 1031 and as long as you pay more for them than the one you sell you won't pay taxes. Your qualified intermediary should be able to council you on this.

Alex Olson · Answer

Hi Carlos what market are you looking to exchange in to?

Carlos Gonzalez · Answer

@stephen Kehoe thank you for response, so as long as the proceeds exceed the purchase price of the properties combined i'm good then.

Can I sell a fourplex and buy two more using 1031?

Most Popular Reply