Newbie Question - 1031, then LLC

[Sujith Wimalasooriya]

Hi,

Here is my background. I have lived in TX and FL. Home in TX, I turned into a rental when I had to move to FL for a job. When I left FL, I owned a condo, and I rented it out.

Now I'm back in TX, living a SFH of my choice. Both rentals are on a 15 year loan. FL got 11 more years to go and TX one got 9.5 years to go.

I have a negative cash flow from FL, since it's Maintenance fee from the complex is higher, 

and they rent it annually. So I have about a $2500 loss a year.

Rental in TX, is generating enough income to pay for taxes, mortgage, insurance etc. It's a break even situation.

So, from both homes, the only good side is the appreciation and have to wait 10-11 years to realize it.

I was thinking about a better strategy to have a positive cash flow. But I need some expertise help here to confirm it, or point out what I'm missing here.

Here is what I'm thinking about doing.

1). Sell both homes next year(Profit around $125k) and using 1031, buy two units somewhere else.

2). Set up two LLC's ( I have two kids college ready. I think it's better to have the properties in LLC's than under my name. I think they have a better chance getting a scholarship this way).

3). Transfer the titles to LLC's.

4). Mortgage both rentals using the LLC, and return the money back to Owner(me)

5). Use the same strategy to buy more rental units.

Of course I'm not covering all the bases here, or completely missing something.

Please advise and I'm open to listen to Pro's.

Thanks,

Sujith