1031 Into New Market Cash Flow Properties

Member since 2023 · 5 posts · 5 votes

I have multiple properties in the Los Angeles area that are being sold, and we are looking for new markets to 1031 exchange into. In the past our model was largely built around property appreciation. However, with this change we would like to reoptimize the portfolio for cash flowing properties, and are not particularly concerned with appreciation. We also have two other investors/portfolios who are looking to do the same thing. We have been reviewing the Chicago area. Looking for real estate professionals in the Chicago area that can helps us navigate the unknown unknowns of a new market. Particular issues we would like to learn about include taxation, neighborhoods, assessment, maintenance and management challenges of the Chicago area.

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Jennie Berger

Lender · Chicago IL · Member since 2020 · 357 posts · 229 votes

Quote from @Dave Foster:

@Scott Hanson, You've got the outline of some excellent analysis started. This is the time in the cycle when a lot of our clients shift from chasing appreciation and start the defensive movement to cash flow. In particular Net cash flow which takes in those x factors of governance, taxation (both current and future) and local vendor factors. There is a book called "The Clipper Ship Strategy" by Richard Marbury that can be a guide to navigate government investment in local economies pre and mid downturn. Don't be put off by the seeming simplicity of the book. It's full of very sophisticated gems. This will give you some insight in looking at cones of government investment that can create safe harbors. Just cause a recession happens doesn't mean the govt stops spending money :)

The midwest has always been a safe haven for cash flow - moderate governance, moderate taxation, stability inflow and ex flow etc. And don't forget to look to states with large electorates and importance in the upcoming elections. Every incumbent seeking re-election will be scrambling to keep these states happy and stable.

Great analysis by you!!

EXCEPT Chicago LOLOL. Nothing moderate about the taxation and governance here. But still, it's a WONDERFUL city and I cannot help but love it! :)

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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
2y
@Scott Hanson, You've got the outline of some excellent analysis started. This is the time in the cycle when a lot of our clients shift from chasing appreciation and start the defensive movement to cash flow. In particular Net cash flow which takes in those x factors of governance, taxation (both current and future) and local vendor factors. There is a book called "The Clipper Ship Strategy" by Richard Marbury that can be a guide to navigate government investment in local economies pre and mid downturn. Don't be put off by the seeming simplicity of the book. It's full of very sophisticated gems. This will give you some insight in looking at cones of government investment that can create safe harbors. Just cause a recession happens doesn't mean the govt stops spending money :)
The midwest has always been a safe haven for cash flow - moderate governance, moderate taxation, stability inflow and ex flow etc. And don't forget to look to states with large electorates and importance in the upcoming elections. Every incumbent seeking re-election will be scrambling to keep these states happy and stable.
Great analysis by you!!
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Jonathan KlemmBusiness Member
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Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
2y
Hi there @Scott Hanson - I am here in the Chicago area and love it from an investment standpoint.
With respect to multi-families and returns is there a specific type of property you might be looking at targeting? Appreciation vs. cashflow?
If you are looking for more of a cashflow play I love the Southeast Corridor of Chicago such a Bronzeville, Washington park, South shore, etc. You'll definitely need a property manager that is hands-on and works in those areas though.
The NW side of the city is going to be a longer-term appreciation play areas like Avondale, Irving Park, Belmont Creigin, Hermosa, etc.
Happy to connect with you further Scott to talk through the city and your plan.
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Jennie Berger
Lender · Chicago IL · Member since 2020 · 357 posts · 229 votes
2y
Quote from @Dave Foster:

@Scott Hanson, You've got the outline of some excellent analysis started. This is the time in the cycle when a lot of our clients shift from chasing appreciation and start the defensive movement to cash flow. In particular Net cash flow which takes in those x factors of governance, taxation (both current and future) and local vendor factors. There is a book called "The Clipper Ship Strategy" by Richard Marbury that can be a guide to navigate government investment in local economies pre and mid downturn. Don't be put off by the seeming simplicity of the book. It's full of very sophisticated gems. This will give you some insight in looking at cones of government investment that can create safe harbors. Just cause a recession happens doesn't mean the govt stops spending money :)
The midwest has always been a safe haven for cash flow - moderate governance, moderate taxation, stability inflow and ex flow etc. And don't forget to look to states with large electorates and importance in the upcoming elections. Every incumbent seeking re-election will be scrambling to keep these states happy and stable.
Great analysis by you!!

EXCEPT Chicago LOLOL. Nothing moderate about the taxation and governance here. But still, it's a WONDERFUL city and I cannot help but love it! :)
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