1031 Exchange - max on purchase price?

Question

Hello RE Geniuses! Forgive me if this is a lame question. I understand the purchase price needs to exceed the sale price of the investment property. But is there a max dollar limit? If I sell our rental property for $500K, can I do an exchange by purchasing a $2M investment property? Thanks in advance!

Dave Foster · Answer

@Lynette Pang, Like @Bill Brandt said, there is no maximum you can purchase.  However, the IRS does put some limitations on how many and the valuations of the properties you identify.  And many times this gets confused with there being a maximum purchase price.  If you name 3 or fewer properties on your 45 day list the value of the properties on your list can be anything.

Colin Dingfelder · Answer

@Dave Foster Thank goodness for these forums. I was confused with the rules of the 1031 exchange and was interpreting that the value of the property that I am buying can not exceed 200% of what I am selling. I now understand that the 200% rule only comes into play if I am listing more than 3 properties as potential buys. Thanks for your knowledge.

Bill B. · Answer

As long as you reinvest all the cash you receive from sale they don’t care if you get a kian for the rest or put cash in for the rest.

Ps. If you out an @ and then someone’s name without a space it will let them know you’re asking them a question

@Lynette Pang

Lynette P. · Answer

@Bill Brandt Newbie here.. but a fast learner! :D Thanks for the reply.

Lynette P. · Answer

Thank you, Bill and Justin!

I'm asking for my in-laws. I'm far from being at the place where I would be doing a 1031. LOL

You brought up a good point - LTV. Does that need to remain the same w/ the purchase? If they have no mortgage on the existing rental property, are they allowed to have a loan on the new purchase?

Justin Hoggatt · Answer

@Lynette Pang, yes, absolutely!  Isn't it great!  The power of the 1031 exchange.  Trading up form $500k to $2m is exactly what I would attempt to do with a 75% LTV type of situation.

Bill B. · Answer

Far as I know only your wallet snd your credit are the limit. Don’t take any “boot” (cash) out and buy more than you sold. Both numbers are net. Congrats on your big plans.

1031 Exchange - max on purchase price?

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