1031 into primary home

Hayward, CA · Member since 2017 · 133 posts · 12 votes

i have a 5 unit investment property. I need to live in a good school district and need to move, however I do not want to sell my primary home. hence looking for option how can I move. questions:

#1 can i 1031 exchange 5 unit into a single family residence ?

#2 is it possible that I rent exchange SFR from my LLC either on my or my wife's name and live there as a tenant for few years before making it my primary residence. - not sure if this is an option

#3 is there any other way i can 1031 into SFR for primary residence use.

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John Warren
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
5y
@Gary B. you should connect with @Bill Exeter. He is very knowledgeable about the 1031 exchange process, and his company recently helped me through a more complicated exchange here in Berwyn.
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
5y
@Gary B.,
1. It's certainly possible to move from one type of investment property to another using the 1031 exchange. So going from MF o SR is no problem. As long as you purchase at least as much as your net sale you'll defer all tax.
2. The nature and taxation of your LLC will determine whether or not you could rent from yourself. However, that's kind of a bleh way to handle it. Because it has you using after tax dollars to rent from you LLC which will then pay tax again on the rent income. So I wouldn't recommend it as a first course
3. It's perfectly fine to complete a 1031 and use that new property for investment for a period (a year or two) and then convert it into your primary residence by moving in. That is not a taxable event. You just have to have a little runway so you can establish that property as investment before moving in.
BTW I dont know why you don't want to sell your current primary. But if you have lived in it for two out the five years prior to sale you can take the first $500K (if married) of profit tax free. That might dovetail nicely with a scenario where you 1031 into your future primary residence and when you move in back sell your old primary and take that profit tax free while leaving the other profit deferred in the 1031 property as well.
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