Can I 1031 Exchange a rental property for a primary residence?

Question

Can I 1031 Exchange an SFR rental property for an SFR primary residence? If not, are there any strategies to get around it?

Mark H. Porter · Answer

Matt, a qualified intermediary can give you the best answer. In my personal experience, you must show the intent to rent the place when you buy it. It’s vague from there. Just make sure your purchase is happening because your intent is to have it as a rental.

Dave Foster · Answer

@Alyssa Dyer, thanks for the shout out. I like what you said @Mark H. Porter, ..."you must show the intent to rent the place when you buy it. It’s vague from there." That's a perfect way t phrase it. @Matt Wells, your intent when you do a 1031 exchange must be to purchase a property you will use for productive investment use. So while the dream of moving into it might be running around your thoughts (and that's OK) your intent must be to initially use if for investment use.

Your question of how long is where Mark's answer comes in - "It's a little vague". There is no statutory holding period. It is all about your intent and how you can demonstrate it.There is a safe harbor of sorts from the IRS at two years providing some other conditions have been met. A lot of folks are comfortable with anything more than a year. And depending on the specific circumstances a shorter (or longer) holding period might be appropriate.

The key is that your intent must be investment and then your intent can change. So think of how you would document that.

Mark H. Porter · Answer

Not directly. You could 1031 to another single family rental that would eventually be your primary residence

Alyssa Dyer · Answer

I would think it doesn't matter who lives in it. @Dave Foster?

Matt Wells · Answer

@Mark H. Porter How long would it be before I would be able to move into the new 1031 exchanged rental property and use it as my primary residence? 6 months or a year?

Can I 1031 Exchange a rental property for a primary residence?

Can I 1031 Exchange a rental property for a primary residence?

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