Using 1031 to bail from Washington and invest elsewhere

[Perry Stanfield]

First time poster here.    We've decided to sell our 4Plex which we've held for 4 years.    We're giving up a 3.625% loan which speaks to our strong desire to look out of state.     We are looking hard at OKC, and still at AZ and TN.      We need to purchase 1.5mm in properties;  we owe 910K on our loan and anticipate our proceeds will be about $550K.    We are under contract for $1.579mm.         If we skip a 1031 our accountant tells us we'll owe $180K in boot taxes.

We are thinking about paying down our loan balance prior to closing; the 1031 would allow us to borrow less money..... even so, looking at rental properties of various sizes, with 40% down on a 6.99 30 year, we're seeing a few COC's in the 4-5% range. A few nicer properties as low as 3.5%. We have a 10 year time horizon so we're OK with relying on appreciation, rent increases, mortgage reduction to improve our net return. 10 year projections look very persuasive. One of many questions I have is..... in this higher interest rate environment, with objectives similar to ours, how low of a COC do experienced investors go to make deals? There's obviously a point where we'd be better off paying the boot tax and investing conservatively in a brokerage account.......

Thank you for your thoughts

[Ken M.]

Quote from @Perry Stanfield:

First time poster here.    We've decided to sell our 4Plex which we've held for 4 years.    We're giving up a 3.625% loan which speaks to our strong desire to look out of state.     We are looking hard at OKC, and still at AZ and TN.      We need to purchase 1.5mm in properties;  we owe 910K on our loan and anticipate our proceeds will be about $550K.    We are under contract for $1.579mm.         If we skip a 1031 our accountant tells us we'll owe $180K in boot taxes.

We are thinking about paying down our loan balance prior to closing; the 1031 would allow us to borrow less money..... even so, looking at rental properties of various sizes, with 40% down on a 6.99 30 year, we're seeing a few COC's in the 4-5% range. A few nicer properties as low as 3.5%. We have a 10 year time horizon so we're OK with relying on appreciation, rent increases, mortgage reduction to improve our net return. 10 year projections look very persuasive. One of many questions I have is..... in this higher interest rate environment, with objectives similar to ours, how low of a COC do experienced investors go to make deals? There's obviously a point where we'd be better off paying the boot tax and investing conservatively in a brokerage account.......

Thank you for your thoughts

We left Seattle for investing reasons. My understanding is that on a 1031 you can use multiple properties to make up the necessary amount. You should check and make sure that is accurate before relying on it though. I never did like the concept of having to buy within a specific time period to do a 1031.

We looked at various states for landlord favorability, cash flow, property taxes, natural disasters, livability, population inflow, etc. WE decided to transfer our investing to Arizona. We like and invest in Texas as well, but the combination of property taxes and ROI for the properties, left it in second place. So we invest in both.

Right now though, it seems prices are cooling in Austin and San Antonio. It isn't clear if you'd be moving to where you are investing or staying put, but I personally would want to be near my investments.