Big 1031 Exchange, need advice. My path to 10k/month.

4 Replies

Hello all, 

I was fortunate enough to acquire 2 luxury investment properties in Seattle several years ago. Since then they have picked up significant equity. I have been keeping a close eye on the market up here and as soon as they get to the number I want, I'm going to liquidate. For the past six months I've been doing my homework, reading BP forums and a few books on REI to prepare myself for the next step, however I'm still unsure how to best achieve my goals. A little about me, 34 Y/O I make approx 80k/year with my 9-5. I don't enjoy working very much so I'm looking to replace my work income with passive income and retire within 3-5 years. I will have approx 1.1M to play with and here's what I've been thinking:

1. Pay cash for as many 80-130k SFH's in solid B neighborhoods as I can afford. This could be done through either brrrr or turnkey. Try and purchase 1 additional home a year with income. I understand this option lacks an exit strategy but this is of little concern to me.

2. Multi family.  I could buy a 15-30 unit building outright or finance a 50 unit in the 2-2.5M range.  Here are my concerns with this option.  It seems like the multi family market is ridiculously inflated right now.  I suppose there are better opportunities off market but how much better could they really be?   I get that large multi family is more efficient to manage but it seems to me that they are A)Way over priced and B) Way lower quality tenant.  

  

My immediate goal is 7k/month cashflow.  My short term goal is 10K, and my long term goal is 15k.  What would you do?          

@Dave Foster correct me if I'm wrong... but you have to take on debt to complete a 1031?

@Matt K. you are right.  I will have to replace approx 700k in debt.  

Hi @Matt K. And @Woody Munk ,

The best way to think about the reinvestment requirements is that if you want to defer all tax you must purchase at least as you sell and use all of the proceeds,

If a mortgage was paid off you don’t have to technically replace it as long as you have cash from some other source or you’re willing to pay some tax on the difference.

Woody also has flexibility in how he allocated those proceeds.  There’s several ways for him to easily and safely achieve those goals.

There's some portfolios up for sale in KC that might fit your needs/goals... and some the sellers have been motivated lately giving good deals... 

If you search redfin for multi family 66061 there literally an entire neighborhood for sale haha

https://www.redfin.com/KS/Olathe/1009-N-Jan-Mar-St-66061/home/83223027 search nearby

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