Multifamily 1031 exchange into new market

Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes

Happy to chat on Kansas City, that'd be KS and MO. There is a mix of ways you can tackle rolling into another but also have go to PM's

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Mark Soreco

OP

Member since 2025 · 31 posts · 21 votes

9mo

Thanks Caleb, I just scheduled a 30 min with you on your Calendly, talk to you tomorrow.

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Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

9mo

@Mark Soreco, congrats on your success thus far! This strategy is what we call a diversification exchange, where you sell an investment property and reinvest in multiple investment properties in a 1031 exchange. This is a solid way to achieve diversification and take advantage of the tax to scale your RE portfolio. Investors who want to access different markets and scale love to utilize this strategy.
One pro hack you'll appreciate - While you have to purchase at least as much as your net sale. And use all of the proceeds in your replacement purchases. You can allocate those proceeds any way you want. You can use this to your advantage to limit risk and debt exposure. Purchase one property for cash and use the rest of the proceeds as a down payment on a second property. This lets you take advantage of some leverage. But also leaves you with one free and clear property. And the equity in this property can be accessed at any time in the future if you find another property you want to buy.

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Mark Soreco

OP

Member since 2025 · 31 posts · 21 votes

9mo

Thanks Dave for the suggestion definitely worth considering. Would like to connect with you and your team sometime soon to discuss options and strategy.

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Sandy Hu

Rental Property Investor · CA|AZ|MI · Member since 2018 · 59 posts · 22 votes

9mo

$2,800–3,200/mo is very achievable, but I’d actually view that as a conservative target in some Midwest secondary markets if the deal is structured well.

For example, I recently worked on a West Michigan duplex that closed around $585k, renting at $2,300 per unit (~$4,600/mo gross). With standard Midwest expense assumptions and professional management, net cash flow still pencils out solidly without aggressive underwriting.

The bigger drivers I’ve seen are:

submarket selection (working-class, low-crime pockets),
realistic taxes/insurance,
and having boots-on-the-ground management you trust.

For a ~$600k exchange, I’d be looking at small multifamily or strong duplexes where you can preserve cash flow while improving return on equity, rather than forcing higher leverage.

Happy to share what’s worked (and what hasn’t) if helpful.

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Mark Soreco
OP
Member since 2025 · 31 posts · 21 votes
9mo
Quote from @Sandy Hu:
$2,800–3,200/mo is very achievable, but I’d actually view that as a conservative target in some Midwest secondary markets if the deal is structured well.

For example, I recently worked on a West Michigan duplex that closed around $585k, renting at $2,300 per unit (~$4,600/mo gross). With standard Midwest expense assumptions and professional management, net cash flow still pencils out solidly without aggressive underwriting.

The bigger drivers I’ve seen are:

submarket selection (working-class, low-crime pockets),

realistic taxes/insurance,

and having boots-on-the-ground management you trust.

For a ~$600k exchange, I’d be looking at small multifamily or strong duplexes where you can preserve cash flow while improving return on equity, rather than forcing higher leverage.

Happy to share what’s worked (and what hasn’t) if helpful.
Hi Sandy, I’d be interested in seeing some examples of deals in MI that were structured well. How do MI markets like Grand Rapids compare with other popular midwest markets such as Columbus OH and Kansas City?
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Sandy Hu
Rental Property Investor · CA|AZ|MI · Member since 2018 · 59 posts · 22 votes
9mo
Quote from @Mark Soreco:
Quote from @Sandy Hu:

$2,800–3,200/mo is very achievable, but I’d actually view that as a conservative target in some Midwest secondary markets if the deal is structured well.

For example, I recently worked on a West Michigan duplex that closed around $585k, renting at $2,300 per unit (~$4,600/mo gross). With standard Midwest expense assumptions and professional management, net cash flow still pencils out solidly without aggressive underwriting.

The bigger drivers I’ve seen are:

submarket selection (working-class, low-crime pockets),

realistic taxes/insurance,

and having boots-on-the-ground management you trust.

For a ~$600k exchange, I’d be looking at small multifamily or strong duplexes where you can preserve cash flow while improving return on equity, rather than forcing higher leverage.

Happy to share what’s worked (and what hasn’t) if helpful.
Hi Sandy, I’d be interested in seeing some examples of deals in MI that were structured well. How do MI markets like Grand Rapids compare with other popular midwest markets such as Columbus OH and Kansas City?
Great question. I’ll try to keep this practical rather than theoretical.

Grand Rapids vs Columbus vs Kansas City tends to come down to a few trade-offs I’ve seen in real deals:

Grand Rapids, MI
- Generally lower entry pricing relative to rent than Columbus/KC
- Strong blue-collar + healthcare + manufacturing employment base
- Taxes are higher than some Midwest markets, but insurance and maintenance tend to be more predictable
- I’ve seen solid Class B/B+ duplexes and small multis where cash flow holds up even with conservative leverage
- Less institutional competition than Columbus, which helps buyers not get bid up as aggressively
Columbus, OH
- Strong population and job growth, but that’s widely known now
- Pricing has compressed faster, so you often need either more leverage or tighter underwriting to hit the same cash flow targets
- Still a great market, just harder to find deals that truly improve return on equity without stretching
Kansas City
- Good balance of scale and liquidity
- More investor-friendly taxes, but heavier competition in the better submarkets
- I tend to see better results here for investors comfortable with larger multifamily rather than small 2–4 unit properties
For a ~$600k exchange where the goal is preserve cash flow + improve ROE, I’ve found West Michigan works well when:
- you stay disciplined on submarket (working-class, low-crime pockets),
- underwrite expenses realistically,
- and have local management in place from day one.
Happy to share more specific deal examples if helpful — a lot of it comes down to where in each metro you’re buying, not just the city name.
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Arman AhmedPro Member

Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 968 votes

9mo

@Mark Soreco

Mark, you’re thinking about this the right way. For a $600k 1031 where the goal is preserving cash flow while improving return on equity, secondary Midwest markets tend to shine when you focus on working-class B and B- neighborhoods with stable employment and professional management already in place. The biggest differentiators I see in real deals aren’t the state names, but submarket selection, conservative expense underwriting, and having boots-on-the-ground property management you trust from day one. Structuring into one or two small multifamily assets, rather than forcing leverage, often keeps cash flow comparable while materially improving ROE and reducing risk.

[email protected]614-418-6081

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Pierre Guirguis

Lender · Marlboro, NJ · Member since 2025 · 243 posts · 150 votes

9mo

One thing I’d stress before zeroing in on markets is making sure the exchange actually improves your risk-adjustedreturn, not just headline cash flow.

If you're netting $600k and already cash flowing ~$3k/mo at very low LTV, the biggest risk I see in 1031s right now is trading into a "cheaper" market that looks better on a pro forma but introduces execution risk, management drag, or thinner exit liquidity.

The deals that seem to work best in this environment are:

Smaller multifamily in working-class areas with stable employment anchors, not speculative growth
Properties with light value-add where in-place rents lag market slightly, rather than heavy repositioning
Markets where cap rates actually hold up on refinance and sale, not just on paper

I’ve seen investors do well focusing on secondary markets with hospital, logistics, or university employment bases where pricing is still rational and management quality matters more than rent growth hype.

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Alfath AhmedBusiness Member

Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes

9mo

Quote from @Mark Soreco:

Have a multifamily property that's appreciated quite a bit and cash flowing well, very low LTV at this point, and am considering a 1031 exchange for one or two other multifamily in another market to increase return on equity. Looking for good cash flow, growing but not speculative secondary market, good working class areas with low crime. Open to other ideas though as well.

Should be net about $600k from the sale. I'm currently getting around $2800-3200 monthly cash flow and would need to get at least that from the new property, if needed could put down payment higher than the standard 20-25%. Considering IN, SD, AL, KS, SC, or other markets.

Anyone have suggestions of areas to check out, with a good commercial agent and outstanding property management recommendation? I'm in CA so would be nice to keep travel distance reasonable but longer distance would not be a deal breaker.

Buy larger multi-family in Columbus. 8-9% cap rates in A/B class areas or 9/11% cap rates in B/C areas. Landlord friendly and ton of Californians are already buying here.

[email protected]614-802-5698

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Multifamily 1031 exchange into new market

Multifamily 1031 exchange into new market

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