I have a simple question.

As my 3-year future plan, I want to purchase a few rental homes, and a few years later I’d like to sell them for new construction 4-plex town house as a down payment.

In this case, am I able to use 1031 exchanges as upgraded investment property?

If your new construction 4-plex is already built, it qualifies as “like-kind” property for a 1031 exchange. If it is to be built, you can still do a build-to-suit exchange. This is a more complicated 1031 exchange and you should work with a qualified intermediary, an attorney and a CPA to protect yourself. Also, a good reference web site is www.ipx1031.com

Good luck.

What about if you built your rental 4-plex unit with your home equity loan for down payment, then after the 4-plex was built, you sell your home… do you think that it will work?

Howdy Rehabbermeg:

That plan will not work. You can not exchange for something you already own. Here again you could have a third party be the builder owner and fund with the HELOC and then sell house and buy the property from the intermediary. The mortgage part is going to be complicated for the construction loan. You will need some professional help with this.