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1031 Exchange to go from a year-long lease SFH rental to a VRBO/Airbnb SFH rental
Posted on 9/3/24 at 6:25 pm
Posted on 9/3/24 at 6:25 pm
Have a single family home (SFH) that has been a full time rental for 20 years and current tenants are moving out this winter. Instead of relisting it again I was considering selling using the 1031 Exchange deal and then taking the money and putting into another SFH but on a lake and trying to do a VRBO or Airbnb kind of setup instead of the year long leases I've been doing with the first property. This is all in the same state (not sure if that's important or not). Can I avoid the capital gains/depreciation recapture by using a 1031 if I go from a normal year-long lease kind of rental property to a VRBO/Airbnb kind of rental property? I understand it has to be "in kind" but both would be SFHs not a duplex or condo or different property type. I also understand that I have to buy the second property within a certain amount of time (180 days I think). Thanks.
This post was edited on 9/3/24 at 6:28 pm
3
Posted on 9/3/24 at 7:49 pm to Jetstream 2000
The"like kind" is satisfied by any type of real estate held for investment. I went from a duplex to a timberland without an issue. Im not sure how the depreciation recapture filters out; i let turbo tax calculate that part.
The timeframes are strict. Identify repacement property (one or several) within 45 days and close within 180. I had my purchase property identified before the sale of the first property.
The timeframes are strict. Identify repacement property (one or several) within 45 days and close within 180. I had my purchase property identified before the sale of the first property.
Posted on 9/4/24 at 6:57 am to Jetstream 2000
I’ve done multiple 1031’s with rental properties usually from one state to another. Never has the issue of long-term vs short-term rental been an issue. The chief concern always involved how long the property being sold was rented in terms of years. The future use of the property being purchased doesn’t seem to factor into it at all.
Posted on 9/4/24 at 7:02 am to dat yat
quote:
The timeframes are strict. Identify repacement property (one or several) within 45 days and close within 180. I had my purchase property identified before the sale of the first property.
Those sort of rules applying to time are very important. Also you can never receive or touch the money from the proceeds of the sale. You have to hire someone to hold the money for you. Before you sell the first property all these things have to be in place. I personally always used a company out of Miami called Starker Services. They even walk realtors new to the process through the steps.
Posted on 9/4/24 at 12:57 pm to Jetstream 2000
Yes this works, but, you need to not have ANY personal use of the VRBO for at least two years after the exchange.
Posted on 9/4/24 at 2:12 pm to LSUFanHouston
quote:
Yes this works, but, you need to not have ANY personal use of the VRBO for at least two years after the exchange.
Interesting
Posted on 9/4/24 at 7:32 pm to LSUFanHouston
quote:
Yes this works, but, you need to not have ANY personal use of the VRBO for at least two years after the exchange
Isn’t that a gray area? Say you purchase the property and renovate the property. After that it takes you a while to get it rented. The stated intention may be for it to a rental, but that doesn’t mean tenants will be in the property on day 1.
Posted on 9/4/24 at 10:01 pm to LSUFanHouston
quote:
Yes this works, but, you need to not have ANY personal use of the VRBO for at least two years after the exchange.
I did not know this. Thank you for sharing.
Posted on 9/5/24 at 10:00 am to Motownsix
quote:
Isn’t that a gray area? Say you purchase the property and renovate the property. After that it takes you a while to get it rented. The stated intention may be for it to a rental, but that doesn’t mean tenants will be in the property on day 1.
What any CPA is likely going to tell you, is not to book a vacation immediately. If you block time off for renovations or work to be done, no one needs to know if you are staying in the property or not.
If you do a 1031 exchange and then stay for 4 weeks immediately as a vacation, its probably not wise.
Posted on 9/5/24 at 12:08 pm to Motownsix
quote:
Isn’t that a gray area? Say you purchase the property and renovate the property. After that it takes you a while to get it rented. The stated intention may be for it to a rental, but that doesn’t mean tenants will be in the property on day 1.
Vacancy is fine, that is not the same as personal use.
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