I know there are a couple 1031 experts out there. I am not.

Can I use 1031 proceeds from a sale to purchase AND REHAB a property so that, after rehab, it will have equal or greater value than the one sold?

Like the rehab $ could be held in escrow & used to pay for expenses?

Or use the proceeds money to purchase & put in more $ of my own to rehab, or.......

In other words, does the replacement property need to appraise instantly for equal or more value than the one sold, or is there some time to work on it?

Thanks in advance

If I sold both of my "problem" houses (in the other post), the total profit could be more than I would spend on a replacement.

Rehab, no. You can not in anyway, ever touch the money.

I have had fencing added to a purchase and that was done before close of escrow and then it fell under the 1031, but everything was lined up and ready to get it done in one day.

The sellers were paid and signed everything, The fence was put in and the next day, I signed paperwork and the property transferred and the fence company was paid out of escrow. You can't do a rehab that quick.

You have to have a contractor who is willing to show up on time, and get the work done on time, and willing to wait to get paid out of escrow. You need a 1031 accommodator who will do the money transfer that way,

Yu can not include any personal property in a1031, no purchasing of new appliances or things that are not actually real estate.

yes you can buy a fixer project.

No you can't use the funds from the exchange to directly fund the improvements.

However you might be able to fund them indirectly. Say you sold one down leg property for $500,000. You could buy two up-leg replacements. Property one is a clean property that you paid cash for. The second property is your rehab project which is more expensive. You buy the rehab project with 20% down and you finance the other 80%. You now need cash to do the rehab.

On property one, which you now own and owe nothing against, you can either get a LOC or a mortgage against. You could even get the at the loan at initial closing on it. You then use those funds to fund rehab.

The other way of doing what you want to do requires you buying the replacement property, taking on more debt than what you had before in the exchange (that is why the govt allows investors to do exchanges - it encourages addition lending). You don't use all the funds that your FI has and you wait the 180 days to get them returned. During that waiting period, you get a loan from the bank with these funds as colleterial.

You can do a 1031 to build and I believe to a remodel as well. I did a lot of research on it last year they way it works is this:

You sell property A for $2m.

You find a building lot for say $1m, that when built out will be worth $3m. I think it has to be at least 50% higher in value.

After the sale, the intermediary gets your $2m, and releases $1m to purchase the property. You have I think its 1 year to spend the remaining $1m on improvements. Whatever you don't spend you pay taxes on.

Call your lawyer if they have done 1031's and get the number for a couple intermediary's, call them and pick their brains. 1031's are not cut and dry their are a few ways to structure one.