In a 1031 exchange do I have to use all money or down payment

Tax, SDIRAs & Cost Segregation
4yFollow

In a 1031 exchange do I have to use all money or down payment

Robert Wood
Member since 2022 · 17 posts · 0 votes

If I do a 1031 exchange I know the property has to be equivalent or  more but can you put just the down payment on that property or do you have to purchase all in cash and also can you 1031 into a auction property some how thanks in advance 

0Reply
105 views

Most Popular Reply

Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
4y

@Robert Wood The reinvestment requirement for a 1031 exchange is a two-part rule, first you have to purchase at least as much as your net sale (contract minus closing costs), and second you have to use all the cash proceeds from your sale in your purchase or purchases.  You can buy a much larger property and take a larger loan.  You can buy several smaller properties - some for cash and some with financing.  The composition of your replacements doesn't matter.  As long as you purchase at least as much as your net sale and use all of the cash you'll defer all tax..

The 1031 Investor5137 Reviews
WebsiteView Page
4Reply
See this reply in the discussion

8 Replies

Jump to latestLatest
  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    4y

    You do have to use all the cash, but you can leverage the remaining amount. 

    You can also always refinance after you close and get the money out. 

    [email protected]941-914-7779
    INVESTOR FRIENDLY CPA®5240 Reviews
    WebsiteView Page
    TaxMD® | Tax Planning Software
    WebsiteView Page
    1Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    4y

    @Robert Wood The reinvestment requirement for a 1031 exchange is a two-part rule, first you have to purchase at least as much as your net sale (contract minus closing costs), and second you have to use all the cash proceeds from your sale in your purchase or purchases.  You can buy a much larger property and take a larger loan.  You can buy several smaller properties - some for cash and some with financing.  The composition of your replacements doesn't matter.  As long as you purchase at least as much as your net sale and use all of the cash you'll defer all tax..

    The 1031 Investor5137 Reviews
    WebsiteView Page
    4Reply
  • Lan Bak
    Member since 2022 · 16 posts · 8 votes
    4y

    On this note, what about mortgage balance that is paid off as part of the sale ?

    I am assuming that need not be reinvested, so net cash = selling price - any mortgage paid off, right ?

    0Reply
  • Robert Wood
    OP
    Member since 2022 · 17 posts · 0 votes
    4y

    Remaining amount? Refinance rite after closing?

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    4y
    Quote from @Lan Bak:

    On this note, what about mortgage balance that is paid off as part of the sale ?

    I am assuming that need not be reinvested, so net cash = selling price - any mortgage paid off, right ?

    As said, the two rules are…

    -use all the Cash received from the sale

    -purchase a property of at least the sale price (less closing costs) of the property sold.

    If you sell a &500k property with a $300k mtg…use to use the $200k cash and buy at least a$500k property…the $300k difference between your cash received and th new $ 500k purchase price can be either through a new mtg or you can bring additional cash.


    2Reply
  • Robert Wood
    OP
    Member since 2022 · 17 posts · 0 votes
    4y

    Thanks buddy by chance do you know if I can use that money on auction/online auction property 

    0Reply
  • Lan Bak
    Member since 2022 · 16 posts · 8 votes
    4y

    Thanks @Wayne Brooks

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    4y

    the regulation is so simple, basically you have to match the original LTV AND actual $ cash/debt position. Other than that it will trigger mortgage boot that's taxable. You can even add your own money to avoid the boot.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free