What is an FHA Home Loan

What is an FHA Home Loan: The Best Solution to Homeownership in 2025

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The Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development, issues a specific type of mortgage called the FHA loan. Do you want to find out what is an FHA home loan? Then, you are in the right place. Here, we will answer your question and feed you info on every other aspect associated with this particular mortgage option.

Why First-Time Buyers Love FHA Loans

FHA mortgage is an extremely good fit for people who want to buy their first home because of the down payment, which is as low as 3.5%. As for the credit score, it should be 580 or higher. The best part is that you can qualify for this loan even if you fail to meet the requirements for a conventional mortgage or if you had a bankruptcy.

While the federal government does not issue FHA mortgages, it does insure them. This insurance protects lenders from defaulters, which is why FHA lenders are willing to offer favorable terms to borrowers who might not qualify for a conventional home loan.

These loans can be issued by private lenders approved by the FHA, such as banks, credit unions, and nonbanks.

You can use the loan to buy or refinance various types of residential properties, including single-family houses, two to four-unit multifamily homes, condominium units, and certain manufactured homes.

FHA vs. Conventional Loans

Generally, qualifying for an FHA loan is easier than a conventional loan, which is a mortgage that is not guaranteed or insured by the federal government.

Below, you will find a list of differences between FHA and conventional loans.

  • FHA allows for lower credit scores compared to conventional loans.
  • As opposed to conventional loans, FHA mortgages require mortgage insurance.
  • Unlike conventional loans, the rules of FHA are much more flexible concerning monetary gifts from family, employers, or charitable organizations.
  • To qualify for an FHA mortgage, the property has to undergo an appraisal to make sure it meets government standards for health and safety. This does not happen with conventional loans.
  • Conventional loans do not require closing costs, but an FHA mortgage does.

Requirements of FHA Mortgages

The Federal Housing Administration has set minimum requirements for borrowers seeking an FHA mortgage. However, every full-service mortgage broker approved by the FHA has the right to determine their own underwriting standards, but only as long as those requirements stay in line with the minimum values set by the FHA.

Lenders also set their own interest rates and fees. If you hope to get the best rates and terms, explore multiple FHA-approved lenders and compare offers.

  • Credit Score

The FHA has set the minimum credit score for a loan to 500. If you score between 500 and 579, you can qualify for the loan with ease, but you have to make a higher down payment of at least 10%. People with a credit score equal to or higher than 580 have to make a down payment of only 3.5%.

  • Debt-to-Income Ratio

The debt-to-income (DTI) ratio is the measure of an individual’s monthly debt payments in relation to their pretax income. What is an FHA home loan? Answering this question means going over these particulars, too. DTI for an FHA mortgage differs based on your credit score and other compensating factors like the amount of cash you have in the bank. If you have a credit score between 500 and 579, the FHA will expect a DTI of less than 43%.

  • Down Payments and Gift Funds

As we have already discussed, the minimum down payment for an FHA mortgage is 3.5%, provided you have a credit score of 580 or higher. Anyone with a credit score between 500 and 579 must shell out 10% of the purchase price to avail this loan. The good news, though, is that you do not have to empty your savings. You can use gift money to complete the down payment, so long as the donor gives a letter with their contact info, their connection to you, the amount of the gift, and a statement that no repayment is required.

  • FHA Appraisal

Any property you wish to buy with an FHA mortgage must undergo an appraisal from an FHA-approved professional and meet minimum property requirements. Note that an FHA appraisal is not like a home inspection. The goal is to ascertain whether the home is a worthwhile investment. There is an FHA 203(k) renovation loan, where the property may undergo two appraisals: an “as is” appraisal that assesses its current condition and an “after improved” appraisal estimating the value once the work is done.

  • Mortgage Insurance

Insurance is built into every FHA mortgage. When you acquire your first loan, you will make an upfront mortgage insurance payment, which can be rolled into the total amount of the loan. After that, you will make monthly mortgage insurance payments. The length of these payments will vary based on the size of your down payment. So, if your down payment is less than 10%, you will pay FHA mortgage insurance for as long as the loan lasts. If you pay 10% or more, you need to pay FHA mortgage insurance for 11 years.

Types of FHA Mortgages

The FHA has various loan options to offer, from standard purchase loans to products designed to meet specific requirements. Here are the most common options.

Basic Home Mortgage 203(b)

It is the standard single-family home loan backed by the FHA. Only primary residences can be purchased with it.

FHA Refinance Loans

If you want to reduce your interest rate, shorten your mortgage term, or get cash flow for a costly project, such as a home renovation, you should go for FHA refinance mortgages.

  • FHA rate and term refinance
  • FHA streamline refinance
  • FHA cash-out refinance
  • FHA 203(k) refinance

FHA Renovation Loans

  • FHA 203(k) rehabilitation mortgages help borrowers finance fixer-uppers by rolling purchase and renovation expenses into one loan.
  • Title 1 property improvement loans are for financing home repairs and improvements.

Specialty FHA Mortgages

  • Energy-efficient mortgages
  • Construction-to-permanent loans
  • Manufactured homes

Loan Limitations

Regardless of the type of FHA mortgage you seek, there will be certain limits on the mortgage amount. These limits differ from one county to the next. This year, the FHA limits range from $524,225 to $1,209,750.

Applying for an FHA Mortgage

You need a few personal and financial documents to apply for an FHA mortgage.

  • A valid Social Security number.
  • Proof of U.S. citizenship.
  • Bank statements for, at a minimum, the past 30 days.

Advantages and Disadvantages of FHA Mortgages

At first glance, an FHA mortgage might seem like the best option for a first-time home buyer with credit challenges. Even then, it is vital that you understand the trade-offs.

Benefits

  • Lower minimum credit score compared to conventional loans.
  • Down payments as low as 3.5%.
  • Debt-to-income ratios as high as 50% allowed.

Drawbacks

  • Mortgage insurance lasts as long as the loan upon making a down payment of less than 10%.
  • Properties must undergo a separate appraisal to meet strict health and safety standards.
  • The loan amount cannot exceed the conforming limit for the area.

Is it Right for You?

Along with the answer to your question – what is an FHA home loan – you have learned just about everything there is to know about this particular mortgage type. When you begin shopping for an appropriate loan, make sure your financials are in good shape. Pull your credit reports from reporting agencies like Equifax, Experian, and TransUnion. Try to address any errors you might find. You should also consider paying down any larger balances if you can because it has the added perk of improving your DTI ratio.

If you think you are ready to get down to business and buy your first home, ALT Financial Network, Inc. is waiting for you. Apply for an FHA mortgage with us today and get approved within minutes.

What is DST 1031 Exchange

What is DST 1031 Exchange? – What You Need to Know

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What Is a DST 1031 Exchange?

Are you wondering what is DST 1031 exchange? It is a combination of two powerful real estate tools: the traditional 1031 tax-deferred exchange and investment in a Delaware Statutory Trust (DST).

Essentially, instead of buying a new property outright in your exchange, you invest in a share of a professionally managed real estate asset via a DST. It’s a smart and streamlined way to defer capital gains taxes while going passive.

A DST 1031 exchange opens doors to larger, institutional-grade properties without landlord headaches.

The Basics

  • Sell Your Property – Begin with a qualifying investment or business property. Use a Qualified Intermediary to avoid accessing sales proceeds directly.
  • Identify Replacement – You have 45 days to choose a DST offering as your replacement asset.
  • Close Within 180 Days – Invest the proceeds into your selected DST shares within 180 days.
  • Passive Ownership – You become a fractional owner; the DST sponsor handles property management.
  • Defer Taxes – You defer capital gains and depreciation recapture while continuing to earn passive income.

Why Investors Choose DST through ALT Financial Network, Inc.

Tax Deferral & Equity Preservation

A DST 1031 exchange preserves the equity from your sold property within a like-kind asset. This keeps more money working for you instead of going to Uncle Sam.

Access to Institutional Real Estate

DSTs invest in high-quality properties—think medical offices and industrial facilities—normally out of reach for individual investors. You can step into these markets with a relatively low entry point.

Hands-Off Management

Say goodbye to tenant issues and property repairs. DST sponsors take care of day-to-day ops, letting you enjoy passive income without landlord stress.

Built-In Diversification

Wondering how to spread risk? You can pick multiple DST investments, each in different property types or regions—boosting diversification with ease.

Speedy Closings

Once you choose a DST, closings are fast—typically 3–5 business days. This helps you meet tight 1031 deadlines stress-free.

Advantages and Disadvantages

ProsCons
Passive income from institutional assetsLack of Control – No say in property decisions
Avoid landlord headaches and liabilityIlliquidity – Lock-in terms can be 5 to 10 years
Lower entry point compared to buying whole propertyFees – Sponsor, management, and closing fees apply

Is DST 1031 Right for You?

Now that you know what is DST 1031 exchange you must determine whether it is for you or not.

You might be a good fit if you:

  • Want to stop managing properties but still need income
  • Need a fast and smooth 1031 exchange process
  • Prefer portfolio diversification with smaller investments
  • Can tolerate long holding periods and limited control

However, steer clear if you:

  • Want full control over property decisions
  • Might need your capital back early
  • Prefer direct ownership without sponsor fees

DST 1031 vs. Traditional 1031 Exchange (Whole Property)

FeatureDST 1031Whole Property 1031
ControlPassive with centralized managementFull control over property
Entry CostsLower investment thresholdHigh capital needed
DiversificationMultiple properties or regionsTied to one property
SpeedCloses in daysCloses in weeks/months

How to Execute a DST 1031 Exchange

  1. Consult with ALT Financial Network – Our team knows DSTs, 1031, and reverse 1031 exchange rules backward and forward.
  2. Pick Your DST – We’ll help you find high-quality DST offerings aligned with your goals.
  3. Hire a Qualified Intermediary – We can recommend trusted QIs to handle the funds securely.
  4. File Identifications & Form 8824 – We ensure your paperwork meets IRS deadlines and regs.
  5. Close & Start Earning – Invest in DST shares, and let the distributions begin.

ALT Financial Network, Inc. and DST 1031 Expertise

ALT Financial Network, Inc. guides investors into DST 1031 exchanges with clarity and professionalism. Our deep knowledge of DST structures, combined with strict IRS compliance, helps investors maximize tax deferral while easing into passive real estate ownership.

We work alongside your other advisors to create a custom-tailored exchange that aligns with your estate and financial goals.

A Real Example

Imagine selling a 750-unit apartment building. Instead of snagging one big replacement, you invest $500K each into three DSTs focused on office, industrial, and net-lease assets.

You get monthly income, avoid direct management, and defer taxes—all while owning real estate.

Make the DST 1031 Move with Confidence

A DST 1031 exchange can transform how you manage real estate—turning active duties into passive income and unlocking opportunities previously out of reach.

With ALT Financial Network’s guidance, you get expert support at every turn. From choosing an ideal DST to handling paperwork and keeping everything IRS-compliant, we’re by your side.

Are you ready to go over what is DST 1031 exchange in person and discover if this strategy suits your goals? Reach out today. Defer taxes, diversify easily, and experience real estate investing without lifting a hammer.

Also Read: 1031 Exchange 5-Year Rule 

FAQs

Q1. Can you do a DST 1031 exchange more than once?
A1. Yes, you can. As long as you follow IRS rules, you can keep rolling over gains from one DST 1031 exchange to another and defer taxes indefinitely.

Q2. Are DST 1031 exchanges allowed for out-of-state properties?
A2. Yes. You can sell a property in one state and invest in a DST located anywhere in the U.S., as long as both properties qualify under 1031 exchange rules.

Q3. What is the minimum investment required for a DST 1031 exchange?
A3. Most DST sponsors require a minimum investment of $25,000 to $100,000. The exact amount depends on the offering, but it’s typically lower than buying full real estate outright.

Q4. Can DST properties generate monthly income?
A4. Yes. Many DSTs distribute rental income from tenants to investors on a monthly or quarterly basis. It’s a popular reason why investors like the passive cash flow DSTs offer.

Q5. Is it possible to include a DST in an estate plan?
A5. Absolutely. DST interests can be passed to heirs, and when that happens, the stepped-up basis may eliminate deferred capital gains taxes, offering estate planning advantages for families.

Can You Do a 1031 Exchange on a Primary Residence?

Can You Do a 1031 Exchange on a Primary Residence?

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Can you sell your home and avoid taxes on a 1031 exchange? It makes sense. The concept is simple, but the answer isn’t. Typically, your residence isn’t qualified.

This guide makes what matters easy to understand, without overcomplicating it.

What Is a 1031 Exchange?

If you’re selling an investment property, you can reinvest the profit in another one through a 1031 exchange. You won’t be paying capital gains tax immediately. You’ll be deferring the taxes by investing the whole amount.

However, this is only available on business or income properties—not your own residence.

Why Your Primary Residence Doesn’t Qualify

The IRS views a primary home as a personal-use property. It’s where you live. If it doesn’t earn rental income or serve a business purpose, it’s not eligible.

Here’s a quick breakdown:

Eligible for 1031 ExchangeNot Eligible for 1031 Exchange
Rental PropertyPrimary Residence
Commercial PropertySecond Home (personal use)
Land held for investmentVacation Home (non-rental)

Only properties used for income or investment purposes meet the requirements.

Turning Your Home Into a Rental First

There is one option that may work. You can rent your home out before you sell it. This changes how the IRS sees the property.

But this shift takes time. Renting it for a short period is not enough. You need to treat it like a real rental.

How to Do It Right:

  • Move out and lease it to actual tenants.
  • Report the income on your tax return.
  • Do not use it personally while rented.
  • Keep it rented for one to two years.

Tax experts often suggest holding it as a rental for at least 24 months to show serious intent.

Mixing 1031 Exchange with Section 121 Exclusion

If you’ve lived in your home for two out of the last five years, you may qualify for the Section 121 exclusion. This rule lets homeowners avoid tax on part of their gains.

You may be able to combine this with a 1031 exchange in some situations.

For example:

  • You live in the house for two years.
  • Then you rent it out for another two.
  • When you sell, you may be able to use both exclusions.

The IRS allows this mix in certain cases, but the steps must be clear and documented.

Can You Buy a New Primary Residence Using 1031?

Yes—but you can’t move in right away.

You have to rent it out first. Only after holding it as a rental for a while can you convert it into your home.

Time PeriodUse of PropertyIRS Expectation
Year 1–2Rented OutTreated as an investment
After Year 2Live in the homeMay qualify for Section 121

This only works if you follow all timelines and treat it as a rental first.

Why You Still Need to Be Careful

Even if your timing is right, you need to document everything. If the IRS reviews your case, they’ll want proof you followed the rules.

Here’s what to keep in mind:

  • Use a qualified intermediary.
  • Follow the 45-day identification rule.
  • Close the new property within 180 days.
  • Keep all records and rental history.

If you live in California, there are extra state-level rules too. 👉 Read our full guide on 1031 Exchange California Rules

When You Don’t Need a 1031 Exchange

Sometimes, you don’t need a 1031 exchange at all. If your home qualifies for the Section 121 exclusion, that may cover your full gain.

Here’s how the two compare:

FeatureSection 121 Exclusion1031 Exchange
Property UsePrimary ResidenceInvestment Property
Tax Benefit$250K–$500K ExclusionFull Tax Deferral
ComplexitySimpleComplex Rules
Time LimitNone45 / 180 Days

So if your home didn’t gain much value—or you meet the exclusion cap—you may not need to do anything else.

Final Thoughts: Know Before You Sell

A 1031 exchange can help you avoid taxes—but not if you’re selling a home you live in. To qualify, you need to change how the property is used, and that takes time and planning.

This isn’t a loophole. It’s a legal strategy that only works if you meet every condition.

Before you make a move, talk to a 1031 exchange professional. A mistake could mean paying more in taxes later.

FAQs

Q: Can I do a 1031 exchange if I only rented my home for a few months?
A: That’s usually not long enough. The IRS wants proof that it was a true rental.

Q: Can I use both Section 121 and 1031 in one deal?
A: Yes, but only if you meet the rules for both and use each part properly.

Q: Do different states have extra rules?
A: Yes. For example, California has its own tracking rules. Learn more here

Q: What about inherited property—can that be part of a 1031 exchange?
A: No need. In most cases, the step-up in basis means there’s no tax owed anyway.

What Is a Reverse 1031 Exchange

What Is a Reverse 1031 Exchange? Ultimate Guide for Smart Investors

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Thinking of reinvesting in real estate without getting hit by taxes? You’ve probably heard of a 1031 exchange. A reverse 1031 exchange can be a powerful tool when you’re ready to buy before you sell. Instead of selling first, you acquire the replacement property and hold it while you arrange the sale. This method helps bridge timing gaps and lock in deals ahead of time. But what is a reverse 1031 exchange, and how does it differ from the typical version? Here you’ll get all the answers of your queries. 

What is a Reverse 1031 Exchange?

A reverse 1031 exchange allows you to acquire the replacement property first, even if your current asset has bot been sold yet. Instead of selling first, you purchase the new property upfront and sell your current one afterward. This will help you to lock the ideal replacement property even before you’re ready to sell the old one. It’s a smart move, but it comes with strict rules and timelines.

Benefits of a Reverse 1031 Exchange

There are various advantages of reverse 1031 exchange that make more interesting to some smart investors, checkout the below benefits:  

  1. You secure your ideal property – You don’t have to rush into buying a replacement within a tight window.
  2. You avoid market pressure – You can wait to sell your current property at a better price.
  3. It offers more control – You can plan the deal around your schedule, not someone else’s deadline.
  4. It protects against failed exchanges – You don’t risk selling first and then struggling to find a replacement in time.

These benefits are the reasons why investors often prefer this method, especially in competitive markets.

how does a reverse exchange work

Keep the Exchange Legally Separate from You

To make a reverse 1031 exchange work, the IRS doesn’t allow you to directly own both the new and old properties at the same time. You need a third party, often called an Exchange Accommodation Titleholder (EAT).

Here’s how does a reverse 1031 exchange work:

  • The EAT holds the new property on your behalf until your old one is sold.
  • Once you sell your existing property, the EAT transfers the new one to you.
  • This setup keeps your transaction “at arm’s length” and follows IRS rules.

This process might sound complicated, but it’s necessary to keep the exchange compliant.

Reverse 1031 Exchange Rules to Remember

This type of exchange has tight deadlines and specific steps. Here are the key rules you must follow:

45-Day Identification Window: You have 45 days from buying the new property to identify which property you plan to sell.

180-Day Completion Rule: The full transaction (buying and selling) must be done within 180 days.

Qualified Intermediary (QI): A neutral third party must manage the funds and property title transfers. You can’t touch the money directly.

Title Must Match: The name on both property titles must match, either your name or the name of your entity (LLC, trust, etc.).

If you miss a deadline, the risk is yours of losing all the tax benefits. This is why many people take 1031 exchange services to handle the paperwork and timing.

Tips for a Successful Reverse 1031 Exchange

If you want to keep the things on track and to avoid mistakes. Keep all the below tips remember:

  1. Line up financing early. You’ll need to purchase the replacement property before selling.
  2. Work with a solid team. A good Qualified Intermediary, tax advisor, and attorney are essential.
  3. Know your timelines. Mark your 45-day and 180-day deadlines clearly.
  4. Avoid disqualified parties. You can’t use family members or business partners to act as intermediaries.
  5. Keep records clean. Document everything in writing to protect yourself if audited.

A little planning before can save you a big headache later.

Final Thoughts

So, what is a reverse 1031 exchange? It’s a powerful tool that lets you buy first and sell later, giving you flexibility and control over your investment timeline.

However, it’s not a DIY project. From tight deadlines to IRS rules, there’s no room for guesswork. Smart investors plan ahead, follow the rules, and work with experienced professionals.

At Altfn, we understand how complex these transactions can get. That’s why many clients trust our expert resources when navigating advanced real estate strategies like this one.

1031 Exchange 5-Year Rule

1031 Exchange 5-Year Rule – Exploring the Fundamentals

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Very few things are permanent in life, with taxes being one of them. Capital gains taxes, particularly on real estate sales, can be extremely burdensome. Fortunately, there is a very popular tax-deferral tool called the 1031 exchange. Savvy investors often rely on it. With this strategy, investors can defer capital gains taxes on the sales of investment properties. This makes it a valuable and useful option in real estate. Then again, like most things that offer profound benefits, the 1031 exchange comes with a few stringent rules and regulations enforced by the IRS. There is a common question many people ask about it: is there a 1031 exchange 5-year rule? This question stems from nothing but a case of mistaken identity. There is no such rule, but the overall process of the 1031 exchange is quite complicated and it is dictated by precise timelines and guidelines that must be followed to the letter.

Is There Such a Rule?

Let’s get down to the thick of it – does such a rule exist? While there are many rules and regulations, investors can rest easy knowing there is no such thing as a 5-year rule for the 1031 exchange. This confusion arises from the five-year requirement for capital gains exclusions on primary residences not associated with 1031 exchanges. However, many investors follow a standard guideline to hold a property for at least one to two tears. It is not an official rule, but this time-frame shows to the IRS that you are not planning to flip the property and that the investment was long-term. This is a critical aspect to qualify for a 1031 exchange California. Despite the significant tax-deferral benefits, one must understand the process thoroughly before going down this road. These exchanges come with strict guidelines, and following them is mandatory if you hope to leverage this powerful tax tool.

Existing 1031 Exchange Rules

As we have already stated, there is no 1031 exchange 5-year rule. However, there are other important rules and regulations that you have to follow if you expect to qualify for the tax deferral. These rules ensure the exchange remains compliant with the IRS requirements. Here are the rules that you need to know.

  1. Like-Kind Property Rule

Every property involved in the exchange has to be “like-kind.” In terms of real estate, this means that the property you wish to sell, as well as the one you want to purchase, must be for business or investment purposes only. The good thing about this rule is that you can choose the type of real estate you can invest in. For instance, you can sell a house for a piece of raw land as long as it fulfills similar purposes.

  1. 45-Day Identification Rule

Once you sell your property, you have 45 days to identify potential replacement options. You need to submit this list in writing to a qualified intermediary, such as ALT Financial. You can list up to three properties or more, depending on specific conditions. This approach eliminates all hitches from the process.

  1. 180-Day Exchange Rule

You have 180 days from the sale of the original property to finalize the purchase of the replacement property. This time-frame includes the 45-day identification period, which means your time starts right after the sale. Keep this fact in mind as you plan.

  1. Qualified Intermediary Requirement

The 1031 exchange process requires the presence and support of a third-party intermediary to oversee and manage the transaction. You will not hold the proceeds from the sale. Instead, it will be in the hands of the intermediary until you are ready to buy your new property. This ensures transparency with the IRS. At ALT Financial, we have experience in handling the 1031 exchange process, along with mortgages like the multifamily loan.

  1. Same Taxpayer Rule

The individual or entity selling the original property has to be the same one buying the replacement. Doing so ensures that you are the one deferring your capital gains tax.

  1. Related-Party Transactions

If you are planning to exchange properties with a related party, such as a business partner or family member, you have to mind the IRS. It enforces stricter rules during such situations. For example, both parties must hold onto their properties for at least two years. If either party sells within that time, the exchange may be disqualified and taxes could come due. If you follow these rules, you will be able to keep your 1031 exchange on track and avoid any problems that might follow later.

Final Considerations

There is no 1031 exchange 5-year rule, but as you can see, there are many requirements that you have to follow and consider before taking on a 1031 exchange. These prerequisites can make 1031 exchanges challenging, especially given the stringent identification windows.

 

Here, at ALT Financial, we specialize in property mortgages, both residential and commercial. Our specialty allows us to help prospective property buyers in 1031 exchanges and other mortgage options. Get in touch with us to find out more.

FAQs

1. Can I use a 1031 exchange for a vacation home?

Only if the vacation home is treated as an investment property. You must rent it out consistently and limit personal use to qualify under 1031 exchange guidelines.

2. Can improvements made to the replacement property count in a 1031 exchange?

Yes, improvements can be part of the exchange, but they must be completed within the 180-day window and before the replacement property is officially received by the taxpayer.

3. What happens if I miss the 45-day identification deadline?

Missing the 45-day deadline disqualifies the entire exchange. You’ll owe capital gains taxes on the sale. Extensions are not permitted, even due to emergencies or holidays.

4. Is it possible to do a partial 1031 exchange?

Yes, you can do a partial exchange, but you’ll owe capital gains tax on any portion of the proceeds not reinvested in like-kind property, known as “boot.”

5. Can I live in a property acquired through a 1031 exchange?

Not immediately. To stay compliant, the property must be rented out for a qualified investment period—typically two years—before converting it to a primary residence.