1031 and closing costs/equity - Posted by Mike IL

Real Estate Investing Real Estate Financing
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Posted by Mike IL on September 24, 2004 at 08:45:09:

Thanks Greg.

Congrats on your recent transactions!

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1031 and closing costs/equity - Posted by Mike IL

Posted by Mike IL on September 23, 2004 at 07:43:21:

I am considering a 1031 with a rental property (SFH) that I will be selling in Feb '05. I read Ray’s article on 1031’s and understand that my equity position in the new propertie(s) must be equal to or greater than what I had in the sold property. What about closing costs? And what about paying off an HELOC that I used to purchase the first property?

Out of the 50k, 25 of it is from an HELOC I took on my primary to get the deal done. I wanted to pay that off when I sold this property but it sounds like if I use a 1031 I can’t pay off the HELOC. How do I ever pay off the HELOC if I am always bringing all the equity from one property to the next?

And lastly, if the equity needs to be equal to or greater than sold property than I will need to pay closing costs out of pocket so that my total equity remains intact?

I see the advantages of the 1031 but I am starting to question how well it fits my situation.

Thanks,

Mike

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Re: 1031 and closing costs/equity - Posted by Rob

Posted by Rob on September 23, 2004 at 14:35:19:

You can go to www.1031.com and read what they have and even ask your question on the site. I was told to contact a CPA to analyze my situation. From my understanding, you are taxed only on your capital gain, which closing costs is not a part of among other things. Your CPA will know how to calculate your capital gain.

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Re: 1031 and closing costs/equity - Posted by Mike IL

Posted by Mike IL on September 24, 2004 at 08:46:14:

Thanks Rob. I have a call in to my CPA now.

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Re: 1031 and closing costs/equity - Posted by greg

Posted by greg on September 23, 2004 at 22:04:12:

I just finish doing a 1031 from a 3 house deal. I rolled the net gain into 2 higher end props. i plan to hold these for long term. Remember if you sell the 2nd property you are now faced with the same issue (taxation)…i suggest 1031 your gains into some high cash flow deal or something you want to hold for a while. Third party (1031 guys) usually have seen it all. Give them a call and ask the right questions.

Good Luck
greg