How to use a coop and can I 1031?

Question

BP friends,

I am in possession of a coop in NYC suburbs.  Unlike most coop owners, after I moved, I have had no problem keeping it rented.  Due to size of mortgage (currently ~$50k) refi to cash out and expand my portfolio is not an option.  Coops also normally carry a mortgage rate premium (~1% above other conventional loans).

So, right now the mortgage is paying for itself, and cash flowing for me.  And the current tenant signed a lease through 2020 and her job literally relocated across the street.  One thought is sinply to hold it.  Mortgage should be paid off within nine years.

But ...

I believe I could be doing so much more with this property and was wondering if folks had thoughts and whether people know if coops were eligible for 1031 benefit.

All thoughts and insights are most welcome.  I feel like I could sell this asset and use the equity for two or three other properties.

Basit Siddiqi · Answer

You are able to 1031 an interest in a co-op that is an investment property for another co-op or ownership in an actual piece of real estate.

Christopher Phillips · Answer

@David Epstein

The IRS has consistently ruled in favor of NYC coops for 1031 exchanges.

https://apiexchange.com/new-york-cooperatives/

David Epstein · Answer

Jason, Thanks much for that insight.  I have considered the HELOC option, but not explored it fully.  thanks for putting it back on my radar.

Jason Lee · Answer

There are lenders that will do Helocs on co-ops... might be more difficult since it's not owner occupied. But perhaps another way to use your equity for other investment opportunities.

David Epstein · Answer

Thanks, all!

Dave Foster · Answer

@David Epstein  That makes it 3 for 3.  1031 away and get the portfolio rolling.

David Epstein · Answer

Thanks so much!

How to use a coop and can I 1031?

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