1031 exchange for multiple properties?

15 Replies

Hey all!

Will be relocating from Portland, OR to Atlanta in the next 1-2 months. Our house in Portland is on the market, and we need to sell it in order to afford the down payment for an Atlanta purchase.

The question: can you 1031 one property for two? The cost to purchase is cheaper in Atlanta, and ideally we’d like to purchase a primary residence and an investment property through the 1031.

Any thoughts are appreciated!

You can, but get with your 1031 QI guy since you CANNOT touch the proceeds.

However, Mark's question is main thing.  If it's a residence, you don't qual for 1031 tax deferral.

Originally posted by @Colin Sullivan :

Hey all!

Will be relocating from Portland, OR to Atlanta in the next 1-2 months. Our house in Portland is on the market, and we need to sell it in order to afford the down payment for an Atlanta purchase.

The question: can you 1031 one property for two? The cost to purchase is cheaper in Atlanta, and ideally we’d like to purchase a primary residence and an investment property through the 1031.

Any thoughts are appreciated!

You can Definately 1031 exchange one property for one to many more properties if you qualify for the 1031 exchange. If it is your primary residence the concept is still the same in that you don't have to pay capital gains on your personal residence up to a certain amount depending on a few other factors (length of residence being one). Talk with your local TAX cpa that KNOWS investment real estate. If they don't, find someone who does.

hope that helps!

@Colin Sullivan , Yep, you can do a 1031 exchange and purchase multiple replacement properties.  But they have to be investment properties.  You cannot 1031 an investment property and buy your primary residence.  And conversely you cannot sell your primary residence and 1031 into investment property.  

If you've lived in the property you own for 2 out of the 5 years prior to sale you'll get the first 250K ($500K) of profit tax free anyway so that is a much better deal.

@Colin Sullivan , If you have an ADU that you have been renting and is shown on your tax return then what you actually have is what we would call a split use property. a percentage of the property is investment. And a percentage is your primary residence. In that case you could take advantage of both. But if your home qualifies for the primary residence exclusion then that is a far better deal because the profit is tax free and you can use it for anything you want.

Your best case with a split use property is that you could 1031 the investment percentage for a new investment property.

If you can take it all tax fee that's the way to go.

@Colin Sullivan , You could be in luck.  There is an exception in the 121 primary residence exclusion that allows you to get a prorated amount of the gain tax free if you have lived in it for less than a year but have to move for a job, or medical related issue.  If you're moving from Portland to Atlanta for your wife's job that would almost certainly qualify.  Your accountant will tell you yes or no.  But I think you're in luck.

@Jaquetta Turner , The 1031 "QI" is the unrelated 3rd party to everyone else in the transaction.  Also called the qualified intermediary they are responsible only for the process of the 1031 exchange.  And the 1031 exchange is the process used to sell investment property and buy new investment property without having to pay tax on the profits.

They're a company like ours that only does the 1031.  You still use all of your regular professionals and a normal closing process as well.