Would you 1031, or take the cash and BRRRR?

[Account Closed]

I am ready to take the next step in my real estate investing career, but I’m torn about how to proceed. I thought maybe I could get some guidance from the more experienced investors here. I have a rental property in the Seattle area that an experienced realtor is confident I can sell for $400,000. I owe $185,000 on the mortgage. I’m getting ready to sell, and move my money into another market for more cashflow. I love the concept of the BRRRR method, because it allows me to recycle my money over and over. If I sold I would be liquid, and could pay cash for properties allowing me to BRRRR. The downside of course is capital gains tax. The amount of tax I would have to pay makes me sick to my stomach to think about. Having cash will give me more opportunities to find off market deals, and give me a competitive advantage. Either way this is certainly not a bad problem to have. I’m in a good position. Which decision would create the most wealth in the long term?

[Matt K.]

Originally posted by @Jaron Walling:

How long have you held the the rental property and how depreciation recapture will you have to pay? $200K could buy 2-3 properties in a cheaper market that's for sure. 

If you want to 1031 exchange you'll have 45 days to target 3 properties and I believe 6 months to close on a property (or multi properties) so that's something to consider.  

In my opinion I'd jump the gun on the 1031 and find cash flowing properties in a smaller market. 

 You can also do a reverse and get the replacements locked down then sale the Seattle one... little more complicated than this but not impossible...