1031 Exchange from an old 1 bedroom to a brand new 2 bedroom.

[Derek Owen]

Investment Info:

Condo buy & hold investment.

Purchase price: $810,000
Cash invested: $450,000

I had purchased a studio next door to a 1 bed apartment I owned, and was going to combine them into a 3 bedroom. Life had different ideas and I sold them both and bought a family home (4 bed) and a 2 bed investment. I did a 1031 Exchange for the investment so had a large down payment.

What made you interested in investing in this type of deal?

Appreciation, passive income and somewhere to invest some cash I came into. A friend was an investor who put me onto the idea.

How did you find this deal and how did you negotiate it?

The initial property was next door so I knew as soon as it became vacant and I had a relationship with the owner, so I made him an offer before it hit the market. I converted this into a 2 bedroom via Zillow.

How did you finance this deal?

I got a good payment from work that allowed me to put 30% down on the studio. I sold that to finance the family home and the 1 bedroom to finance the investment property. The initial money I saved from my wages.

How did you add value to the deal?

I had the bathroom remodelled as it was very dated.

What was the outcome?

Studio was bought for $300k (Brooklyn prices), rented for 5 years and then sold for $450k.
1 bedroom was bought for $455k and then sold for $740k. This gave me enough to put 50% down on the investment property.

Lessons learned? Challenges?

Initially I managed renting it out but as soon as I used a decent realtor it made it so much quicker and raised the rental amount. Newer properties take much less management.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with a guy called Quinn Hagstrand @ Corcoran in Brooklyn. He rented the apartment and then sold both for me. Can't say enough positive things about him. Great experience.

[Alex Olson]

Great work with a 1031 exchange! What do you think the next step is to building more wealth?

[Derek Owen]

I'm interested in multifamily but my local market is very expensive, therefore I am looking into how to buy out of state. In order to be able to repeat this process it seems like the BRRRR method is the way forward. I'm not sure I completely appreciate the complexity of getting work done on a property remotely, so trying to do as much research as possible to support this. Any guidance welcome!

[David Malott]

Nice work with the 1031. I'm also in NYC area and bought my first out-of-state in Huntsville, AL. It's amazing what you can buy for the same money. 

[Sean Ross]

@Derek Owen great job on the 1031 exchange.  Posts like this provide a lot of motivation for other investors.