1031 Investment vs. 2nd/vacation home
I sold a property I owned for 4 years, during the last 2 years it was used as a vacation rental. I am using a 1031 to acquire a new property that will be used primarily as a vacation rental. For purposes of the new mortgage for this property am I required to obtain a investment property loan (higher interest rate) or can I claim it as a 2nd home and get the lower rate. I am not clear how Revenue Procedure how or if 2008-16 Provides Safe Harbor Guidance applies in my situation.
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- Rental Property Investor
- Brandon, SD
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Hi @Dan Moe I am going through this very issue right now, looking for a vacation rental in Florida. I've talked with about 10 bankers and everybody is excited to hear from the investor until you start talking about a commercial loan. Then it becomes very difficult. If the sale property of your 1031 was in your name then you should be able to get a residential loan if you plan to use the vacation rental for yourself part of the time. If it was in a corporation, you'll need to get a commercial loan.
I talked with 2 bankers, each eager to get my information. Both thought I didn't understand the difference between a residential and commercial loan when I clearly said "I need a commercial loan." They proceeded to get all my info and happily quote low rates for a residential loan. When I connected them with my 1031 exchange suddenly it was "We don't do those kind of loans." Hope my story saves you some time.