1031 Tax exchange or use sale proceeds to pay off other rentals?
Hello. I need advice. I am selling one of my rentals that is wrapped in a note with 3 other properties. I can either use the proceeds to pay off the entire note or do a 1031 tax exchange. If I pay off my note, the added income of not having a mortgage offsets the loss of income from selling the rental so it is a wash and I have peace of mind because I'll have 3 out of 14 of my properties paid off. (I have 15 rentals on a 3 yr balloon at 5.5% interest and would like to reduce to 10 paid off properties to free my time to earn money other ways).
OR I can try to find another property to exchange into to avoid gains and recapture taxes. My paper loss from last year will result in me not having to pay any taxes in 2018 even with the sale of this rental, however I will likely benefit from keeping this loss to roll into 2019 since I'm expecting my income to increase from another job.
If I did an exchange I'll only have to roll 95K into a replacement property but I'm having a hard time finding a property to buy that's of equal value. I don't mind buying greater value but would have to incur even more debt.