question regarding 1031 Exchange

[Christine N.]

Hi everyone.  I bought a rental residential property for about $500k, and I estimate it will sell for about $1 million.  The property needs to be repaired in order to be sold.  The estimated repair cost will be about $100k.  I also need to do a 1031 Exchange.  For simplicity, let's just say that I will net $500k after the sale (after putting in $100k for repairs).  I believe that in a 1031 Exchange, all of that $500k net gain will need to stay in escrow and be moved to the new property.  I'm told that I cannot touch any of that $500k net gain.

Here's the problem.  I do have the $100k for repairs but I don't want to fork out $100k to put into this rental property for repairs because my $100k will be tied up and be stuck in the next property due to the 1031 Exchange.  If I do put in $100k for repairs, is there a way for me to get this $100k back into my pocket during the 1031 Exchange process, so that it doesn't go into the next property?  If not, how can I spend $100k of repairs and not have this $100k be tied up into the next property that I purchase, which will be a 1031 Exchange?  Thanks.

[Account Closed]

@Christine N.  So there is some missing information here that is important so we can advise you. I agree with @Scott Wolf, if this is a flip, a 1031 would not work.  Has the property been tenanted and if so, when was it placed in service?  Taking money out for maintenance can trigger a boot if you are not careful!  I always like to loop my favorite 1031 guy, @Dave Foster on posts such as this.  He has helped many of my clients and is an expert who is also willing to help break it down to where it makes sense and keeps you straight with the tax man.  Dave?