Re: 1031 exchange - Posted by ray@lcorn
Posted by ray@lcorn on March 26, 2001 at 10:12:26:
Sue is correct in her analysis of your situation. You can’t exchange for property you intend to flip.
However you can get to a good portion of the equity without incurring tax liability.
One strategy for getting your hands on the equity may be to do a cash out refi of your existing property, then exchange for another investment property closer to home. This would accomplish three things… cash now to use for your flips, acquire another long term asset, and defer the tax.
If I interpreted your numbers correctly, 80% financing on your present property would give you about $60T (less closing costs) to play with for flips. You would then seek a replacement property with at least $256T in debt and $69T in equity. That should put you squarely in the market for say a small NC apartment building, maybe ten to twelve units. But it can be any type of investment property, not necessarily apartments.
Assuming profitable activity from your flips, using the $60T for seed money, and the acquisition of a producing asset in the 1031, you could easily pyramid your original investment very nicely into two or three times the existing equity in a relatively short period of time.
One note: Remember that you must trade equal or up in debt and equity for a valid 1031, so keep that in mind as you search for the replacement property.