Thinking about swapping an investment property for a Surfside condo without triggering a big tax bill? You are not alone. Many investors use a 1031 exchange to defer capital gains while repositioning into Miami‑area condos. In this guide, you will learn how a 1031 works, the exact timelines, Surfside‑specific condo checks, and smart backup options if a direct purchase is not practical. Let’s dive in.
Surfside 1031 basics
A 1031 exchange lets you sell real property held for business or investment and buy like‑kind U.S. real estate while deferring federal capital gains tax. It defers tax; it does not erase it, since your gain carries into the new property’s basis. For a quick primer, see this clear overview of 1031 rules and limits from a trusted explainer and the IRS reporting instructions for Form 8824, which you file for the tax year of the sale. Learn the core 1031 rules. Review IRS Form 8824 guidance.
Key timing rules you must hit:
- You have 45 days from the sale to identify replacement property in writing.
- You have 180 days from the sale to close on the replacement property. The two periods run at the same time. See a concise 45/180 timeline explainer.
To keep the exchange valid, a Qualified Intermediary must hold your proceeds. You cannot touch the funds between the sale and the purchase. You will also confirm use as an investment, not as a personal residence, when you report the exchange on Form 8824.
Can you use a Surfside condo?
Yes. A Surfside condo can qualify as a replacement property if you hold it for investment or business use. The IRS offers a safe harbor for “dwelling units,” including condos, that spells out rental and personal‑use tests. Read the IRS safe harbor (Rev. Proc. 2008‑16).
Safe harbor rules at a glance
- Hold the dwelling at least 24 months.
- In each 12‑month period, rent it at fair market rent for at least 14 days.
- Limit personal use to the greater of 14 days or 10% of days rented.
You do not have to use the safe harbor, but it reduces audit risk. If you expect some personal use, document a clear, multi‑year rental pattern.
Common traps to avoid
- Too much personal use right after the exchange.
- Related‑party structures that trigger strict holding requirements.
- “Boot” from cash out or reduced debt on the new condo, which can be taxable.
Surfside realities that impact your exchange
Surfside sits in a condo‑dense, coastal part of Miami‑Dade. That brings extra underwriting and safety scrutiny that can affect your timing, financing, and carrying costs.
Financing and project eligibility
Many Florida buildings face project‑level reviews by lenders and the GSEs. Issues like reserves, insurance, or litigation can make a building ineligible for conventional loans, which shrinks the buyer pool and can affect resale. Always ask your lender to confirm project eligibility early. Check Fannie Mae’s ineligible project guidance.
Recertification, milestone inspections, and reserves
After the 2021 collapse in nearby Surfside, Miami‑Dade tightened recertification timelines and inspections. Buildings face milestone and periodic structural reviews, and many associations boosted reserves and assessments. Verify a building’s inspection status, reports, and any planned repairs or assessments. Review Miami‑Dade’s recertification program.
Costs and risk profile
Higher insurance premiums, stricter reserve funding, and capital projects can raise your monthly costs. For an investor, that reduces net yield and can influence rent targets. Build these items into your 1031 budget and timeline.
Step‑by‑step plan to trade into a Surfside condo
- Map your tax picture with a CPA and plan to file Form 8824.
- Select a Qualified Intermediary before you close your sale.
- Talk to a condo‑savvy lender to screen buildings for project eligibility.
- Shortlist buildings and request association records early.
- Identify replacement condo(s) in writing within 45 days.
- Close within 180 days and keep proceeds with your QI until funding.
- If you plan limited personal use, follow the safe harbor for two full years.
Due diligence checklist for Surfside condos
Use this list before you commit 1031 funds.
- Association finances: current budget, audited statements, delinquency list, and any current or planned special assessments.
- Reserves and reports: latest reserve study and structural integrity or milestone inspection reports. Confirm scope, timelines, and funding.
- Minutes and litigation: association minutes for 12 to 24 months and any pending lawsuits. Florida’s condo statute provides access to official records. See Chapter 718 records access.
- Insurance: association property, wind, and flood coverage levels, premium trends, and any recent claim history.
- Project eligibility: ask your lender if the building is eligible for FHA, VA, or GSE financing. Review GSE project eligibility rules.
- Estoppel/resale certificate: request it early to confirm fees, assessments, and rules.
- Unit‑level checks: legal description, certificate of occupancy, open code violations, flood zone and elevation, and expected flood premium.
- Rental rules: minimum lease terms, short‑term rental restrictions, and caps on rental percentages. If you rely on the safe harbor, plan leases accordingly. See the IRS safe harbor.
Budget and tax items to model
- Boot: Cash out or a net reduction in mortgage debt can create taxable boot.
- Debt matching: Many investors match or exceed prior debt to limit recognition.
- Depreciation: Prior depreciation carries forward and may be recaptured on exit.
- State context: Florida has no personal income tax for individuals, but federal rules still apply. If a party is foreign, address FIRPTA withholding with counsel early.
For detailed reporting mechanics and calculations, use the IRS instructions for Form 8824. See Form 8824 instructions.
Backup paths if a condo will not work
- Delaware Statutory Trusts: DSTs can qualify as like‑kind replacement property, offering passive ownership and institutional‑grade assets. They have tradeoffs like limited control and sponsor fees. Explore how DSTs fit 1031s.
- Reverse exchange: If timing is tight, you can acquire first and sell later using a specialized structure. It adds cost and planning but can save an exchange. Learn the basics of reverse exchanges.
Next steps
If you want a Surfside condo as your next investment, get your team in place before you list the property you are selling. Confirm your QI, line up a lender who knows South Florida condos, and start pulling association records for target buildings. If you want a local guide who works condos every day, connect with Christopher Ulloa to map your plan and move on the right opportunity.
FAQs
What is a 1031 exchange for a Surfside condo?
- It lets you sell investment real estate and buy a Surfside condo held for investment while deferring federal capital gains, as long as you follow 45/180‑day deadlines and IRS rules.
How much personal use is allowed after I buy?
- Under the IRS safe harbor, rent at fair market rent at least 14 days per year and keep personal use to the greater of 14 days or 10% of days rented for each of two years.
Why do some Surfside buildings fail financing reviews?
- Lenders and GSEs can flag buildings over inadequate reserves, insurance gaps, major repairs, or litigation, which limits conventional loan options and can affect resale.
What happens if I miss the 45‑day or 180‑day deadlines?
- The exchange generally fails and you may owe tax on the sale; set reminders and have backup properties to identify early.
What documents should I request from the association?
- Budget, financials, reserve study or structural reports, minutes for 12–24 months, insurance policies, litigation disclosures, estoppel/resale certificate, and rental rules.
What if I cannot close on a condo in time?
- Consider a DST as a passive replacement or a reverse exchange to buy first, both of which require early planning and professional guidance.
