Should I sell two houses to pay off one??

Question

Dave Foster · Answer

@Mike Ackley there's a lot of personal choice in that line of thought but I think I can advance the ball a little. A 1031 exchange is a sale of investment property followed by a purchase of investment property. You cannot exchange into your primary residence. No you can always convert a rental into a primary residence but it takes some time. So for a period of a year or two you're still going to have 2 houses regardless.

One thing to think about is that if you're contemplating doing a 1031 and buying a $500K investment and then converting that into your primary you will probably make even less than you are now on the investment house in the interim because you'll be trying to get investment cash flow out of a property that isn't best suited for investment use.

It can certainly work but I sense a lot of other concerns than just the desire for a $500K primary residence.

A lot depends on your geography but one option would be to do the 1031 and supplement with cash from the sale of your primary and purchase $500K of investment property free and clear. You should be able to net 7% -8% in noi.

And I've seen $500K property's rent for $2500 a month. So you could gain $35000 annually in noi plus appreciation plus tax write offs and exchange that for living in a $500K house for $2500 a month.

Some people hate the thought of renting. But you can get a lot more house for your money at the upper end. And you don't have to deal with the blue tarp of death like I'm looking at on my house right now with no rental income to offset the expense :(.

Should I sell two houses to pay off one??

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