How to roll over 1031 exchange funds

[Robert Pickett]

I have a mid-term rental in Southern California near the beach that is consistently losing money each year. It is worth approx $1.1 million and I would net approx 500K from selling. I plan to sell it and roll the funds over and NOT cash out. I am conflicted on whether to use the 500K on one big property (ideally multi-unit) or buy several smaller properties. All of these would be out of state, likely in Tennesse, Georgia, Alabama, etc. where the money will go much further and landord rights are better than CA. I do not want fixer-uppers, only properties ready to Long-term rent. Questions/opinions on: (1) one property or several, and (2) whether to buy outright or put large downs and then supplement with mortgages. My long-term goal to continue aquiring properties. I have 880 credit score, decent savings, and no other debt except for 300K mortgage on my primary residence (worth $1.5 million). I know there is no one right answer and some variable, but looking for ideas/advice. Thx in advance. 

[Bill B.]

I think you’re under a misconception that’s leading you to think you have options you don’t…

You say it’s worth $1.1M and you’d net $500k. That’s fine but how big is the gain? That’s all that matters. If you paid $950k and only get $1M after selling costs, don’t bother with the 1031. If you paid $600k, great, do a 1031. But…. 
     
You’re going to have to buy at least $1M (or whatever you clear after selling costs.), worth of replacement properties, not $500k. That means paying all cash isn’t an option unless you plan to bring another $600k to the table. 
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My last note would be to try to buy 3 or less replacement properties, it makes the exchange much easier and you avoid some additional rules. You’ll have 45 days from your sale to identify them and you’ll have to buy enough of them, and only them, within 180 days of your sale to meet your 1.1M requirement, or face taxes. Of course you can never have control of the money and you must have your QI in parcel before your sale completes. 
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Reach out to someone like @Dave Foster. He’s constantly handing out free advice, wrote the book on 1031’s and handled mine last year.