Refinance Income Property/Tax Implications
I purchased a 12 unit apartment building in Los Angeles for 1.25M in 2005. Subsequently, I spend 100K in legal expenses, labor and materials to improve the overall income and value of the building. Currently, I am working on a refinance to pull out approximately 300K in equity to complete the renovations. The appraisal came back at 1.8M. I am working on a 70% LTV which would allow me to pull out between 350K and 400K. I plan to finish the rehab, rent the units and turn around and sell the building. My question is this: When I sell the building, am I liable to pay taxes on the equity I pulled out of the building during the refinance? I have not decided whether I will perform a 1031 exchange. How will this affect a 1031?