How to 1031 ~$1M + cash-out refi later

Question

Planning to sell a 4plex in San Diego and 1031 into something worth around $1-1.5M. After adequate seasoning, I want to cash out refi the new property to access the equity. I'm flexible on what to buy with the 1031 exchange if it facilitates getting 70+% of the money out later. I've read a little about "zeroes" but it sounds like zero cashflow isn't necessary per se. Recommendations? Best practices?

Dave Foster · Answer

Account Closed, Not sure if you're talking about a zero coupon DST? These are designed to absorb the greatest amount of debt by having the least amount of cash influx. This would not be your best bet unless you have debt on the 4 plex now and would want to absorb the debt. so you could purchase another asset in cash to later refi that one. A zero coupon provides no regular cash flow. Instead all cash goes to amortize the debt. So at the end of the period you have received no cash flow but you do have a free and clear (or significantly paid down) asset.

In that case a zero coupon would be perfect for you.

1. Sell the four plex and 1031 into

a. A free and clear property which you will refinance as soon as you purchase it.

b. A zero coupon DST which will absorb any debt you had on the 4 plex and only require around 15% cash component.

Account Closed · Answer

Hey Tyson, a zero coupon DST sounds like what you're referring to. I'll message you with some info!

How to 1031 ~$1M + cash-out refi later

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