How to 1031 tax exchange?

Question

So I’ve recently hit a year on my house hack property in Florida, and I’m only a few years out from finishing my current military enlistment. Rather then let the house sit on the market rent less while I transition out of the navy. I plan to 1031 into another property(s) in the Cleveland area. Is this a good plan if so who do I speak to about starting the process?

Bjorn Ahlblad · Answer

You can start with this guy here @Dave Foster

Dave Foster · Answer

Thanks for that shout out @Bjorn Ahlblad.  @Rudy Nieves, a 1031 exchange will let you move that current property (or at least the investment portion) to Cleveland while continuing the defer any tax that might have been due.  We've worked with bunches of military folks just like you who have moved their portfolios with them to each posting and then to their final destination after retiring - all tax free.  It's a great plan.

You'll use all of your regular professionals - realtor, title company accountant etc.  There is one additional person who is required - the qualified intermediary for the 1031 exchange.  They can only perform the 1031 portion of your transaction.  And they have to be involved prior to the closing of your sale.  There's timelines and hoops.  But you're approaching this methodically and should have no problem.  I'll reach out via pm and put some resources and info in your hand.

Henry Clark · Answer

Recommend you join a military REI forum.

Henry Clark · Answer

Are you E5 or above.  Can you get BAH Base Allowance for Housing?

If so, recommend you don’t 1031 and sell then buy in Cleveland.  You have to live somewhere while you’re still in Florida, so you will make more money getting BAH and paying your house down.  Versus renting or staying on base.

Since your past 12 months then you can sell and pay 20% capital gains.  Check with your tax person. Actually recommend you live there another year as your primary residence.  If you live in a house for 2 years as your primary residence out of 5 years and you sell you don’t have to pay taxes on it.

How much is your house worth?  Recommend you don’t 1031 depending on the value.  Fees not worth it.

If your going to stay at your current base for more than 2 years and your looking to make more money in REI recommend you sell and move up into a 3/2, 3/3, 4/3 etc.  Get fellow soldiers to move in with you and use their BAH.  Anyone goes past due you just call their commanding officer and they will take care of getting you paid.

Stay in this house for two years continuous as primary residence then decide to sell and pay taxes or 1031 to Cleveland.

If you’re up for it, recommend you go civil service overseas and do BAH over there.  Plus your Civil service years and your military years combine for your retirement.

Even if you make no gains on your property you’re still ahead by the BAH payments.  Say your BAH is $800 per month tax free.  No other property is going to earn you a 1/4 of that much.  With no risk.  Disregarding appreciation.

Lyndsay Zwirlein · Answer

Could you keep the FL property as a rental and save for another property to purchase wherever you move next? For owner occupied properties, an FHA loan only requires 3.5% down.

Alex Olson · Answer

@Rudy Nieves Since you are looking at the midwest, which is good, I also recommend looking at growth markets like KC for your 1031 exchange. I think most of the midwest is solid but of course am partial to KC. I can show you why I think it is an amazing place to invest.

How to 1031 tax exchange?

Most Popular Reply