Buying and Living in an Apartment Building (tenants, mortgage, mortgage)

[Shikaka805]

Hi!!!

I was thinking about buying a small apartment building, but also living in one of the units.

What are the advantages/disadvantages to this? Can I still 1031 exchange it? Tax disadvantage? Any information would be great!

THANKS!!!

[stevep]

If you get it for the right price, the advantage is you can almost live there for free meaning that the rents from the other apts should cover the entire mortgage. Also, in the past, it was easier to get a mortgage (and at a lower interest rate), because it would be owner occupied, but you'd need to check into it now with all of the mortgage problems. The disadvantage is that the tenants can just knock on your door at any hour with any problem.... but a plus is that you're right there, so there shouldn't be any wild parties going on.

[Shikaka805]

Can I still live in the apartment building and do a 1031 exchange?

[DMenscha]

Originally Posted by Shikaka805

Can I still live in the apartment building and do a 1031 exchange?

This is an excellent question for a CPA, please consult one for a proper answer. You may find the following helpful.

I would form a Limited Liability Corporation (LLC) to own the property. The LLC could then do a 1031 exchange upon sale of the property. If you own it in your name I think you muddy the waters substantially.

The IRS website has a page on 1031's but you have a special case there.

Let us know what the Tax Professional says.