Some of the most common questions we get about 1031 exchanges involve the question of residential property. Can you use a residential property as one of your 1031 properties? Does it make a difference if it is entirely used for personal use, rented out some of the time, or if it is just a rental property and not used at all for personal use?
In order to qualify for 1031 treatment, the Replacement Property should be held for investment or business purposes. If you immediately start using the Replacement Property for extensive personal use that may jeopardize the 1031 exchange.
From the IRS
Both the relinquished property you sell and the replacement property you buy must meet certain requirements.
Both properties must be held for use in a trade or business or for investment. Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify for like-kind exchange treatment.