Possible 1031 Exchange Scenario

[El Inversionista]

Hi everyone, I was curious about a possible way to extricate myself from a less-than-ideal condominium using a 1031 exchange.

I currently own outright a condo in a city in which I can't imagine I will ever live again. It is currently rented out for a nice monthly rent, but the association fees, property taxes, and 10% management company fee make it a pretty bad deal for me. It has been rented out, and depreciated, for about five years.

I was thinking maybe I could find a piece of rental property, either a single family home or a condo, in my current preferred area. I would do the 1031 exchange into the new property, then rent it out on a nightly/weekly basis on airbnb or vrbo. I would be able to occasionally use the property myself when it's not rented out, while being careful not to trip the personal use limits.

After two years of this, I would then convert the property to my personal residence. I would then eventually be entitled to the $250,000 primary residence capital gains exemption.

Would this work? Or is there something I'm missing?

Thanks in advance!

[Bearded Man]

I don't see a tax or legal reason this would not work. Just make sure you have management strategy in place before you take this on.

[arebelspy]

The best suggestion I have is to talk to a 1031 exchange company (now, before anything is done) to get your questions answered.

[phred]

You aren't allowed to handle the transaction yourself.  You'll need to find a (learned) referee

[Blindsquirrel]

  Seems reasonable but check the 1031 company info first. The recapture of depreciation is a flying bitch if you sell anything you have held awhile not on a 1031.

[bigbenreiss]

You are allowed to do a 1031 by IRS rules that I dealt with if you do it yourself. The only thing is you CANNOT touch the money. You have to have it wired from oe sale to the other on the same day without touching it. So if you cannot do that for an reason then get the company. tht will also give you like 9 months for close to close.