Can you 1031 a wholesale deal?

2 Replies

I’m new to investing and have been studying and educating myself in whole sale. I am unsure how to get a contract of assignment and I’m unsure if it’s possible to 1031 a deal that I wholesaled into a rental.

@Sean Beksinski A 1031 is all about intent and ownership. In the purest sense with wholesale deals you do not take title to real estate so there is no real estate for you to sell and do a 1031 on.  A 1031 has to be an actual sale of real estate followed by a purchase of real estate.  So I don't think your scenario works for that reason.  If you were selling real estate and wanted to purchase another flip or wholesale deal that too does not work but this time it's because your intent in purchasing the replacement would not be to hold for productive use.

There is no statutory holding period that qualifies a property for 1031. However, if your intent right off the bat is to sell then a 1031 will not work because your intent was not to hold but to resell. However, if you're willing to hold the property for a while before selling then you have a much stronger case to show that your intent was to hold for productive use and a 1031 would be appropriate. Most folks feel comfortable with a hold of more than a year but There are all kinds of things that can demonstrate your intent in addition to the length of time you actually owned it. And there can also be factors that may justify a shorter or longer hold period.

Make sure your intent is to hold for productive use and be able to demonstrate that. Then let circumstances change your intent.