Exchange to cash neutral or pay the cap gains?

[Michael Delpier]

If the market is so hot that I can't find a deal that nets cash flow, would you buy a cash neutral property, or just pay the capital gains tax and depreciation recapture??

I thought the answer would be easy, but once you account for all the sales commissions, 1031 costs, and closing costs, both for the initial sale, and the future sale once you do find a better investment, it can get quite expensive to buy a neutral cash flow (read bad investment).

My situation is I have a property that is appreciating extremely well (at the moment) but is $185/mo negative. I want to do a 1031 into a cash flowing property. 2 months ago when I started this process, there were several SFR's that met my criteria. But this seems to have disappeared. I'm getting a little worried about meeting the 45 day identification period. But I won't buy a cash flow negative property. I already have one of those :)

There are still some base hit deals out there, but they don't meet my criteria for location and max rent. Going outside these criteria seems to add significant risk and overall vacancy costs.

Or maybe there is a way to extend the 45 day period and still meet the 180 day timeline.

Advice?