200K in 1031 money. What do you do?

Question

I have two properties in California. One I lived in, and one has always been a rental. The one I lived in has been rented for the past 5 years, so I can't avoid capital gains. I live in San Diego, and want to sell both properties, and am not sure of what to do with the proceeds.

So - for those of you with experience. You have 200K in equity to work with on a 1031 exchange. What do you do? Where do you buy? What do you look for?

Thanks!

So - for those of you with experience. You have 200K in equity to work with on a 1031 exchange. What do you do? Where do you buy? What do you look for?

Thanks!

Dave Foster · Answer

@Daniel Lehman . Your question is more geared to a "what's the flavor of the month reinvestment" question. I'll let others speak to that since there's a whole lot of where and what and how many to choose from. From the 1031 perspective though there is one other possibility that may not naturally occur to you.

If you can combine those sales in a compressed time frame it would be possible to combine them (the time frames have to overlap) into one or more larger assets. Depending on the market and asset class you end up working with $200K could be a nice down payment on a commercial property or it could be used as down payments on several smaller properties. And when purchasing those you can allocate the proceeds from both sales in whatever way you want. As long as you purchase at least as much as you sell and use all of your cash in the purchases you'll defer all tax and depreciation recapture. Combining the two just gives you more flexibility.

Just another thought

Robert Comstock · Answer

a thought....you might be able to work with an investor who will buy the properties from you in a controlled closing so you can time it with the acquisition of you new property....likely cost you some equity though

Basit Siddiqi · Answer

@Daniel LehmanYou can potentially buy up to $1,000,000 in real estate if you get 80% loan to value mortgage.I would prolly aim for for a little less in total value so you have some funds as a rainy day fun and to also have a budget for repairs/improvements.I think it is a good idea to diversify your assets at this point in the market.I would like to see if you can get 2 3-4 unit properties in a B / B- / C+ class neighborhood.You instantly reduced some risk by transferring 2 units into 6-8 units.on a side-note, I really like San Diego. The weather is beautiful and the food is good. I may settle down there sometime in the future.

Daniel Lehman · Answer

Yeah, I am definitely interested in leveraging the cash into a down payment for larger assets, or more RE. I would definitely sell them at the same time, and not pay cash, but get as much bang for the buck as possible. Thanks man!

200K in 1031 money. What do you do?

200K in 1031 money. What do you do?

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