I am converting my primary residence into a rental, and I am wondering if I can sell some of my other rental property and 1031 exchange that money into my current mortgage on the was-a-primary-residence-now-is-a-rental property.
If not, is there a way I can sell the property to myself to clean the slate and start the property as an investment, and then use the money to 1031 exchange into the property? (I’m thinking of refinancing anyway…would that help in establishing it as a new investment property?)
Hi, Unfortunately you cannot exchange into a property you already own (and/or pay down the mortgage) with 1031 $ from another sale of property you already own. One thought is to refi the old primary into an investment property loan (not required though…) and use the money toward the pay down on the investment property.
Ok. Thanks. Bummer that I can’t 1031 exchange into the existing loan.
Do I understand correctly that if I refinance the property I am converting to a rental, I can then 1031 exchange the proceeds from the sale of my other rental properties into this property?
Negative. When you 1031 exchange, you need to give up a deed and you need to receive a deed (to property you don’t own). You cannot use 1031 money to pay off mortgages, car loans or anything else tax deferred. If you sell the old property, you could use part of the money to buy new property and part of the money to pay off the mortagage, but the mortgage money would be taxable boot and not tax deferred. Call me at 800-282-1031 ext. 314 if you would like to talk further.