1031 for property co-owned with owner using as primary residence

2 Replies

Hi everyone,

I was wondering if it is possible to 1031 exchange a SFH rental for a 50% interest in a 4plex (the 50% interest will be of greater value than the prior SFH, paid via cash + commercial loan, and both units will be rented out).

However, the other 2-units will be purchased as a primary residence (with 1 of them rented out, but using a loan for a primary residence). 

I would imagine this would be okay, as the original investor's proceeds are re-invested entirely into an investment property. Would this arrangement cause any issues?

@Ian Cruz , Nothing wrong with that scenario at all.  As a matter of fact it's a great way to combine the favorable financing of a primary residence with the purchase of an investment property.

When that property is sold you'll be able to take the portion allocated to the primary residence tax free (providing you've lived in it for two years).  And the other allocation that was the product of the 1031 you'll be able to do another 1031 exchange on.

Kind of the ultimate house hack - part tax free, the rest tax deferred, and all of it at advantageous lending terms.

Originally posted by @Dave Foster :

@Ian Cruz, Nothing wrong with that scenario at all.  As a matter of fact it's a great way to combine the favorable financing of a primary residence with the purchase of an investment property.

When that property is sold you'll be able to take the portion allocated to the primary residence tax free (providing you've lived in it for two years).  And the other allocation that was the product of the 1031 you'll be able to do another 1031 exchange on.

Kind of the ultimate house hack - part tax free, the rest tax deferred, and all of it at advantageous lending terms.

Thanks for the info, Dave!

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