I'm considering selling some rental homes to fund new commercial construction. As simple as the question is, searches don't find the answer. Can I 1031 exchange out of my residential rentals and into commercial investment property?
A 1031 exchange must be for "like property". Take a look at the articles and IRS publications on what is considered "like property". There is a lot of info. out on this, I just don't have time to look it up right now.
if the homes were held as rental property as will the commercial property, is "for rental" the like use?
1031s can go into TICs and the buyer doesn't have much control of what's in the TIC.
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Ask Bill Exeter at www.exeter1031.com, and share the answer with us here. He was a member but I haven't seen him here for a while, unfortunately. He is an expert on 1031 exchanges.
Chris
Short answer: Yes!
Rental houses can be 1031 exchanged for another property(s) held for Investment purpose.
A construction exchange is a bit complex- you will have to use licensed contractors and will not be able to pay yourself for work, as I recall. There is also the problem of completing it in the six month exchange window. It is more costly as the qualified intermediary has to handle the money for the duration, paying suppliers, contractors, etc. But the first step is ensuring that the property you are going to construct is considered like kind.
Chris
Yes, any kind of real estate can be exchanged as long as they are held for rental, investment or use in your business. So, residential SFR's can be 1031 exchanged into commercial.
Now, you indicated commercial construction. What exactly do you mean by that? Are you going to be acquiring the property AFTER it has been constructed or will you be using your 1031 exchange funds to acquire the land and do the construction?
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Yes, any kind of real estate can be exchanged as long as they are held for rental, investment or use in your business. So, residential SFR's can be 1031 exchanged into commercial.
Now, you indicated commercial construction. What exactly do you mean by that? Are you going to be acquiring the property AFTER it has been constructed or will you be using your 1031 exchange funds to acquire the land and do the construction?
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