Owner occupied duplex best markets for 1031 exchange

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Owner occupied duplex best markets for 1031 exchange

Kumar Gaurav
Member since 2019 · 258 posts · 35 votes

Hello,

I need to soon relocate to CA soon due to my new job in SF so I will need to sell my duplex .

I currently occupy one of the units so I don’t have to pay any capital gains tax on that but the unit I currently rent I will end up paying capital gains tax if I don’t go with a 1031 exchange. The other unit is worth around $500,000 and I may end up paying tax on up to $120k. I was initially thinking about investing in a duplex or triplex in with upto 500k in Oakland CA due to its close proximity to SF but it looks like the prices have gone up really high now, I was also thinking to invest around Roseville, Tracy or even Sacramento at least in a single family but I would like to know are there any other markets worth looking into for even better Cashflow?

Is AZ better than Sacramento , I am open to other ideas, appreciate your inputs.

Thanks

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Jacqueline Gardiner
Engineer · Genoa, NV · Member since 2016 · 87 posts · 59 votes
5y

Have you considered just keeping your duplex wherever it is and hiring a property manager to manage the day-to-day operation? 

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  • Thomas Corley
    Real Estate Agent · Phoenix, AZ · Member since 2018 · 127 posts · 62 votes
    5y

    @Kumar Gaurav AZ is a great market very hot right now and a lot of indicators that point it will continue. A couple other things to keep in mind is lower property tax and more landlord friendly then CA.

    There is still opportunities to cash flow! Let me know if you have any more questions! Happy Investing!

    1Reply
  • Jacqueline Gardiner
    Engineer · Genoa, NV · Member since 2016 · 87 posts · 59 votes
    5y

    Have you considered just keeping your duplex wherever it is and hiring a property manager to manage the day-to-day operation? 

    2Reply
  • Kumar Gaurav
    OP
    Member since 2019 · 258 posts · 35 votes
    5y

    @Jacqueline Gardine

    Yeah I did it’s a bit complicated managing if i am not staying. I would have given it a little more serious thought if I stayed in East Coast itself.

    0Reply
  • Kumar Gaurav
    OP
    Member since 2019 · 258 posts · 35 votes
    5y

    @Thomas Corley

    Thanks Thomas. Is AZ good for multi family investment duplex ,fourplex etc? Do you think managing the rental from CA is doable while still cash flow?

    0Reply
  • Thomas Corley
    Real Estate Agent · Phoenix, AZ · Member since 2018 · 127 posts · 62 votes
    5y

    It is definitely doable to still cash flow even being out of state I have clients that definitely do!

    As far as finding small multi family they can definitely harder to find. There is a good amount in downtown PHX but other then that definitely very hard to find and competitive but doable for sure.

    SFR in great neighborhoods is definitely a great way to go in AZ.

    0Reply
  • Caleb Koehn
    Real Estate Agent · Sacramento, CA · Member since 2020 · 9 posts · 3 votes
    5y

    Hi Kumar,

    Sacramento and Roseville are both very strong rental markets. Sacramento is constantly growing in population every year and rent prices are growing at double the national average. Cash flow might be more slim than markets in different states, but it is a safe bet to assume you will be able to comfortably raise rents each year at a minimum of 5%. 

    I hope this helps!

    2Reply
  • Ranjit Sandhu
    Real Estate Broker · Rocklin, CA · Member since 2020 · 221 posts · 82 votes
    5y

    I’m from Rocklin area and as Caleb mentioned above Rosevillle/Rocklin are very hot right now. Please let me know if you need any help in my area. 

    1Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Kumar Gaurav, Or another out of the box option would be to find a more expensive multifamily where you want to live.  Your 1031 replacement has to be worth at least $500K in order for you.  But you could use the 1031 proceeds to buy say a duplex for a mil (maybe a tough order for to demonstrate).  You would use half of it for investment and live in half.  And still get to keep the proceeds from the primary residence exemption tax free.

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    1Reply
  • Jeff T.
    Rental Property Investor · Culver City, CA · Member since 2014 · 221 posts · 79 votes
    5y

    @Kumar Gaurav you will have the same issue in AZ as you do on the east coast with Management. Plenty of people manage out of state properties with a property manager.

    Anyhow, I am just saying selling and finding something else to buy in another area or state is more complicated than finding a property manager and a tenant for an existing building , so I wouldn’t necessarily use that as the sole reason to sell.

    Good luck

    1Reply
  • Kumar Gaurav
    OP
    Member since 2019 · 258 posts · 35 votes
    5y

    @Jeff T.

    Thanks Jeff, I have a much better cashflow (if not I at least break even) when I am here as I live in a much larger unit with extra rooms that I can rent with additional cash flow but I think renting my entire unit alone would be very challenging as there will not be many prospective tenants that will need so much space (6 beds and 3 ba )and willing to shell additional rent .

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    5y

    @Kumar Gaurav almost any market will cash flow better than CA. Are you open to out of state? If so, how far?

    0Reply
  • Kumar Gaurav
    OP
    Member since 2019 · 258 posts · 35 votes
    5y

    @Mike D'Arrigo

    Hi Mike,

    Yes I am open to OOS ideallly prefer something closer within the same coast as CA for example AZ but will be open to others if the numbers work well including PM costs.

    Thanks

    0Reply
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