Sell and 1031 into house hack?

[Alex Song]

Hey BP family,

My wife and I have decided on acquiring a duplex to house hack in we recently purchased our current home December of 2021.  We did put 20% down on our purchase we’ve thought about taking a Heloc out but we would need a lot to make our next purchase.  

So we’ve thought to sell our home and 1031 into a duplex and house hack.  But ideally we would like to keep some of the proceeds for reserves but we understand if so we would have to pay capital gains on the proceeds we didn’t use for a the down payment  towards the duplex.  

Ultimately we'd prefer to acquire the duplex through structuring a deal with a private money lender convert our current primary into a STR Air BnB and then house hack into the duplex.

Would love to hear your guys thoughts or recommendations on this and thank you for your time for checking out my post.

[Dustin Allen]

@Alex Song

You cannot 1031 out of or into a personal use property. If you sell, you'll have to pay capital gains taxes since you haven't lived in the house for 2 of the last 5 years. If you can pull equity to make the purchase happen, that might be the best idea. Just make sure that the numbers work with STR income and the income from the other unit in the duplex.

[Bill Brandt]

You probably signed some paperwork that said you would live there for a year. So in December you can start renting it out and buy a duplex to move in to. Or you can sell and pay taxes, (now or then) as it’s not an investment property and you haven’t lived there two years. Though your taxes would pry be small after paying closing costs. Or you can sell in December 2023 tax free. 

[Basit Siddiqi]

You can't 1031 into a personal residence.

[Dave Foster]

@Alex Song, I don't see a 1031 in this scenario initially. You can't 1031 the house you're living in.  But, your idea of househacking a duplex is splendid.  You can get favorable financing.  and once you've lived in one side for two years you'll be able to sell and take the gain from the side you live in tax free.  And you can 1031 the portion of the sale allocated to the rental side.  It's a great scenario.  You just have to be a little patient.