Investments into down payments with a 1031 exchange

2 Replies

Hey Everyone,

I'm an REI newbie looking for my first deal. My wife and I have excellent incomes, sizeable investments, and $30,000 saved up in our emergency fund. I want to start investing in real estate and exploring options to come up with a down payment big enough to get a good interest rate, get under 80% LTV, and have a decent cash flow.

Let's say I find a potential deal and the down payment was $50,000.  I have nearly $400,000 in investment accounts...would I be able to liquidate $50,000 and 1031 that money into the down payment and avoid the capital gains taxes?

@Jordan Northrup , Sorry to say but securities are specifically exempted from 1031 treatment.  So if you want to jump into real estate you'll need to pay the tax on that liquidation and use the net to jump start your real estate investing.  Once you've got the money into real estate then you can absolutely 1031 from there into other investment real estate.  

Not sure what's out there product wise but if you could find a lender private or otherwise willing to lend against your portfolio that might work as well.

Otherwise it'll be an exercise to determine the investments with the greatest/least gain attached to them.  Sell those and start real estate investing.

Dave, thanks for the advice.  I'll look into other routes for raising enough capital to make a down payment.  Would you ever dip into your savings/emergency fund to get a down payment together?