Updated 3 months ago on . Most recent reply
type lending to maximize cashflow for 1031 replacement properties
Late spring or early summer this year I'm looking to offload a residential property in the 800 - 900K range, which should throw off approximately 200k in cash. For conversation's sake, I believe the 1031 will be roughly 800k+ in replacement properties with aprox 200k down in cash, and the properties plan to be held for a minimum of 2 years. I'm struggling to make those numbers work. What type of lending product would be best to maximize cashflow? Thank you in advance.
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If I'm understanding correctly, at around 75% LTV on an $800k replacement, it's tough to create strong cash flow in today's rate environment regardless of product. Most 1031 buyers end up in DSCR because it's flexible and income-based, but the rate is usually a bit higher, so it doesn't fix the problem on its own.
Where this usually gets solved is either adjusting leverage, being very selective on rent-to-price, or buying something with clear upside you can execute on after closing. A lot of 1031 buyers end up forcing deals just to satisfy the exchange timeline, and that’s where the numbers break. If you haven’t already, it’s worth modeling a couple different structures before you lock into a purchase. Small changes in leverage or rents can materially change how this performs.