1031 Exchange rental vs. new construction

[Mike Choukour]

Hello,

I have a rental condominium in Sarasota and I am considering selling it and buy with the proceeds new construction brand new home that will be ready in November 2018. At the closing of the new home, I will offer it for rental for few year.

I may have about 150k of capital gain on the sale of my condo unit. Is this transaction eligible for 1031 exchange?

Best,

Mike

[Dave Foster]

@Mike Choukour, It sounds like you're selling an investment property that you have held for some time for productive use.  And your intent is to purchase an investment property that you also intend to use for productive use.  Type doesn't matter.  The use and your intent does.

That's a perfect 1031 opportunity depending on the valuations and timing.

1. In order to defer all tax you must purchase at least as much as you sell.  So if the new construction is more expensive then you're golden.

2. Remember that you only have 180 days from the sale of the old property to take title to the new one.  And there are no exceptions or extensions.  So if you're going into contract for a new build that builder needs to be darn sure they'll be finished by day 180.