Selling my property

Member since 2022 · 3 posts · 8 votes

I’m selling my NYC property and planning a 1031 exchange to defer capital gains taxes. Instead of reinvesting in one expensive property, I’m looking to buying properties out of state. I’m hoping to see if the brrr method seems more reasonable to do with what I’m going to have what’s left or just fixing & renting. The goal is to diversify & maximize cash flow & potentially own multiple properties all at once.

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Melissa JusticeBusiness Member

Rental Property Investor · Phoenix, AZ · Member since 2024 · 519 posts · 1k+ votes

@Brian Hernandez,

That’s a smart move using a 1031 exchange to defer taxes! Given that you're selling in NYC and looking to diversify out of state, I’d consider this:

The BRRRR method can work but doing it remotely (especially across multiple properties) adds a lot of complexity-managing contractors, timelines, budget creep, and refinance variables. If you're not already plugged into a strong local team in your target markets, it can eat into both time and returns.

An alternative to consider, especially for diversification and immediate cash flow is to invest in multiple turnkey rental properties across landlord-friendly markets in the Midwest or Southeast. These can be a mix of new builds and fully rehabbed homes, already tenanted and managed, which helps you hit the ground running and spread risk.

This way, you still achieve:
-Diversification across multiple properties and markets
-Strong cash flow from day one
-Minimal management stress

Happy to share insights on markets where other investors are successfully using their 1031 exchange to pick up 2–4 cash-flowing rentals instead of just one expensive asset. Let me know!

Best of luck,

Melissa

[email protected]313-221-8718

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Samantha Wakaruk
Property Manager · Allentown, PA · Member since 2025 · 14 posts · 6 votes
1y
We have many investors from the NYC area that are investing in the Lehigh Valley PA. Still close enough to NYC if you are local so they can walk through the places they're buying if they so choose. I also have a lot of clients that are moving away from residential units and buying office spaces in NYC. Diversifying in other zip codes is definitely a smart choice.
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Scott JohnsonBusiness Member
Specialist · Greenville, NC · Member since 2019 · 673 posts · 408 votes
1y
Have you read the tax publication on Like Kind Exchanges from the IRS? Highly recommend that you study the heck out of it so you have a firm understanding of the process. There's timelines involved so it's important to plan ahead.
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Jared Smith
Real Estate Agent · Lakeland, TN · Member since 2015 · 214 posts · 105 votes
1y
@Brian Hernandez just like @Scott Johnson mentioned there are strict timelines associated with 1031 exchanges, but I do like your idea about splitting out your investment into multiple properties. I like it because in the future you can break off individual properties and sell them and either do another 1031 or pay the taxes on that smaller % of your larger initial 1031.
You are really just deferring your capital gain and depreciation recapture taxes until you eventually sell and pay or pass away and your survivors can benefit from the one-time step up in tax basis for the property as the ownership changes.
Best of luck, if you have additional questions or are looking for purchase options, please reach out!
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Scott JohnsonBusiness Member
Specialist · Greenville, NC · Member since 2019 · 673 posts · 408 votes
1y
Defer then die (muuuuuuuch later and naturally) 💪🏻 Great way to pass on tax free wealth to your kids 👧
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Alex Olson
Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
1y
Hey Brian just sent you a DM if you would consider a market like KC?
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Melissa JusticeBusiness Member
Rental Property Investor · Phoenix, AZ · Member since 2024 · 519 posts · 1k+ votes
1y
@Brian Hernandez,
That’s a smart move using a 1031 exchange to defer taxes! Given that you're selling in NYC and looking to diversify out of state, I’d consider this:

The BRRRR method can work but doing it remotely (especially across multiple properties) adds a lot of complexity-managing contractors, timelines, budget creep, and refinance variables. If you're not already plugged into a strong local team in your target markets, it can eat into both time and returns.

An alternative to consider, especially for diversification and immediate cash flow is to invest in multiple turnkey rental properties across landlord-friendly markets in the Midwest or Southeast. These can be a mix of new builds and fully rehabbed homes, already tenanted and managed, which helps you hit the ground running and spread risk.

This way, you still achieve:
-Diversification across multiple properties and markets
-Strong cash flow from day one
-Minimal management stress

Happy to share insights on markets where other investors are successfully using their 1031 exchange to pick up 2–4 cash-flowing rentals instead of just one expensive asset. Let me know!
Best of luck,
Melissa
[email protected]313-221-8718
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
1y
@Brian Hernandez Selling your NYC property via a 1031 exchange and reinvesting out of state is a smart way to defer capital gains and depreciation recapture taxes while increasing cash flow and portfolio diversification. Both BRRRR and fix-and-rent strategies can work, but BRRRR is more complex under 1031 rules due to the 45-day identification and 180-day closing deadlines, and you cannot refinance during the exchange without triggering boot, which is taxable.

A common strategy is to use 1031 funds to buy undervalued rentals, complete renovations after the exchange, then refinance later to pull out capital tax-free. Fix-and-rent is simpler, IRS-compliant, and still allows for value-add and strong depreciation benefits. All rental property acquisitions allow you to deduct mortgage interest, property taxes, operating costs, and depreciation, helping offset future rental income. Work closely with a 1031-experienced CPA and qualified intermediary to structure your exchange for maximum tax efficiency and compliance.
This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.
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Jimmy LieuBusiness Member
Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
1y
Quote from @Brian Hernandez:

I’m selling my NYC property and planning a 1031 exchange to defer capital gains taxes. Instead of reinvesting in one expensive property, I’m looking to buying properties out of state. I’m hoping to see if the brrr method seems more reasonable to do with what I’m going to have what’s left or just fixing & renting. The goal is to diversify & maximize cash flow & potentially own multiple properties all at once.
Hey Brian, sounds like you're making a smart move by looking to diversify and stretch that 1031 exchange capital further out of state. BRRRR can definitely be a powerful strategy, but it really depends on your risk tolerance, experience, and how involved you want to be. If you're newer to BRRRR or managing from out of state, it might make more sense to start with solid value-add rentals—fixing and renting in markets where you can still hit the 1% rule and cash flow from day one. Columbus, OH is a market a lot of investors overlook but should really consider—it's one of the few places left where you can still find properties in the $120K–180K range that cash flow and have strong appreciation upside. The macroeconomics here are on fire with massive population and job growth, plus huge corporate investments from Intel, Amazon, Google, Facebook, Honda, Microsoft, and more. You can definitely pick up multiple properties with the proceeds from your NYC sale and spread your risk across different assets. Plus, it's a very landlord-friendly state, which is key if you're investing from afar. Happy to connect and answer any questions you have!
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Kerlous TadresBusiness Member
Realtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votes
1y
Hey Brian,

BRRRR is great for quick portfolio growth but requires more time and effort. Fix-and-rent offers stable cash flow with less hassle but slower growth. A mix of both could help you diversify and maximize cash flow.

Let me know if you need help with market or property analysis!
[email protected]614-490-1163
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
1y
@Brian Hernandez, This model is what we call a diversification exchange when you reinvest into multiple replacement investment properties. Applying the BRRRR method can be a great way to start scaling your RE portfolio and reach out-of-state markets, like others have said here.

Keep in mind that your reinvestment requirements are that in order to defer all of the tax, you must purchase at least as much or more than what you sold for. It can be one replacement property or multiple replacement properties

Another option would be to complete your exchange and do a cash-out refi of the newly purchased property, which would give you access to 75-80% of your equity tax-free that you could put towards any renovations.

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Mohammed Rahman
Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes
1y
Alright, here’s the straight talk.

Selling your NYC property and using a 1031 exchange to go out of state is a smart move if you’re aiming to stretch that equity. Instead of rolling it into one pricey property, you can definitely break it up and target lower-cost markets — places like the Midwest or South — where you can scoop up multiple single-family or small multifamily properties.

Now, about the BRRRR method (buy, rehab, rent, refinance, repeat): it works great if you can buy low, rehab cheaply, force up the value, and then refi out most (or all) of your cash to roll into the next deal. But remember, BRRRR is pretty cash-intensive upfront because you have to cover purchase + rehab before you can refinance. It also has more risk — bad contractors, market shifts, appraisal surprises — which can mess with your timeline or returns.

If you want smoother cash flow and less headache, just doing fix-and-rent with clean, turnkey properties (or light rehab) might be the better route. You lock in cash flow faster and don’t have to wait on a refi to access your money again.

Bottom line: if you're ready to get hands-on and don't mind managing rehabs (or have a solid team), BRRRR can grow your portfolio quicker. But if you're aiming for steady, predictable income across multiple units, buy-and-hold rentals might fit better.
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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
1y
The great thing about a 1031 exchange is that you can exchange one property for multiple properties and for properties located in another area.

Just be mindful that the capital for the rehab will have to be in addition to what you received from the sale to fully defer the gain.
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