1031 or Cashout Refi

[Cameron J.]

I have a rental with long standing tenant that cash flows ~$350 a month. Ive been thinking of about selling and doing a 1031 to roll the equity into 3 new rentals (2 net new) which would effectively triple my cashflow and loan pay down. Given the current pandemic situation and pending election, Im looking for suggestions on whether others would sell or just do a cash out refi and purchase 2 new (1 net new) rental. The second offer would effectively double my cashflow.

One additional note, I have received an offer yo from a new investor to purchase the house with the tenants in it for market price.

Thanks,

Cameron

[Dave Foster]

@Glenna Wood, good point about the basis being split.  But that can actually be a positive in a couple ways.

1. Any amount you purchase more than your sale is additional depreciable basis.

2. If you're forced into a sale remember you're selling a less expensive property so even though the basis is lower the sales price will be lower.  So you won't have quite as much gain to worry about.  

As far as depreciation goes a cash out now doesn't have any impact on basis.  And that is one of the arguments in favor of the refi - it's not a taxable event.  

Good thoughts.