Sell my building for 700k and 1031 or keep

Investor · Garrison, NY · Member since 2015 · 47 posts · 35 votes

I own a two family in The Hudson Valley. Purchased for 240k with 60k renovations around 7 years ago. One of my tenants wants to buy for 700k. I don’t have mortgage on it.
it pulls in $4250 a month rent from both units.
I’m recently divorced and need to secure a monthly income to free me up to concentrate on finding deals.
I'm thinking of selling and doing a 1031 on a 1 million dollar building then waiting a year and doing a refi to pull the money back out to buy several STR.

Is this a crazy idea?

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Logan McKay Zylstra

Realtor · Provo, UT · Member since 2020 · 374 posts · 270 votes

I would put it on the open market, in this housing market, you could probably get more than you think.

Second, I would 1031 into a bit bigger than a 1 million dollar property. If you put 25% you could get something at 2.8 million (or at 50% you could get a $1.4 million dollar property), thus securing a higher monthly income.

Last, the points (cost to originate these loans) you would pay to do a refinance only a year after wouldn't make sense to me. I would use a HELOC instead. That way you can buy your STRs when you find good deals, rather than being eager to buy once you have the money from the refi.

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Logan McKay Zylstra
Realtor · Provo, UT · Member since 2020 · 374 posts · 270 votes
4y
I would put it on the open market, in this housing market, you could probably get more than you think.
Second, I would 1031 into a bit bigger than a 1 million dollar property. If you put 25% you could get something at 2.8 million (or at 50% you could get a $1.4 million dollar property), thus securing a higher monthly income.
Last, the points (cost to originate these loans) you would pay to do a refinance only a year after wouldn't make sense to me. I would use a HELOC instead. That way you can buy your STRs when you find good deals, rather than being eager to buy once you have the money from the refi.
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David Lant
OP
Investor · Garrison, NY · Member since 2015 · 47 posts · 35 votes
4y
Thanks for the reply. It’s a real dilemma to sell. I just feel that the timing is perfect to get the max out of the building right now.
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
4y
@David Lant

I like Logan's idea a lot, I do have one additional option you could look into. One thing a lot of our clients are doing is buying one larger property with the proceeds from the exchange and then adding an additional property on the same exchange. You can allocate the funds from your sale however you want, so you could have one property free and clear and then use the rest of your proceeds on a down payment for your STR and mortgage the rest. After all that is done you could take out a HELOC on the property that you own free and clear and you wouldn't be subject to the time crunch that you're worried about. And you wouldn't waste money on an initial purchase that you will immediately refinance.
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Michael PorchePro Member
Rental Property Investor · Boise, ID · Member since 2017 · 220 posts · 101 votes
4y
Hey David! Definitely not a crazy idea, however it'll be good to write out all the numbers and see how much you will be able to produce with STR in where you are buying. and also to take a look at the appreciation that has been going on in your market. I can fill out a quick spread sheet for you if you want. I wouldn't mind
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Andrew Frowiss
Real Estate Agent · Austin, TX · Member since 2016 · 96 posts · 69 votes
4y
Quote from @Logan McKay Zylstra:

I would put it on the open market, in this housing market, you could probably get more than you think.
Second, I would 1031 into a bit bigger than a 1 million dollar property. If you put 25% you could get something at 2.8 million (or at 50% you could get a $1.4 million dollar property), thus securing a higher monthly income.
Last, the points (cost to originate these loans) you would pay to do a refinance only a year after wouldn't make sense to me. I would use a HELOC instead. That way you can buy your STRs when you find good deals, rather than being eager to buy once you have the money from the refi.

I was about to type up something just like this. I agree 100%.
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