1031 exchange SFH to Multifamily, or leverage equity?

[Ryan Hall]

In the recent BP podcast EP 250, Grant Cardone responded to Brandon's fire round "1031 exchange" question with a cryptic response. GC mentioned something about 'the six months being the important part' with a cheeky, wink wink demenor.  What did he mean?.

I am transitioning out of the single family home I have rented out. this very well be my ticket to entering the multi family market. That is, unless holding it and leveraging the equity is a better idea. I don't know if I should go to the banks now with a loan application to obtain funding for a multifamily now, I have rented it for over two years, so I might be able to show rents as revenue with Fanny Mae for debt to income ratio purposes.

This sfh is worth about 125k more than what I owe on it that’s:

• Out of my area
• Rented until April 1
• Break even after capital expenditures

I was thinking about buying a multi family on a 1031, but I don't want the 45 day rush. 

I would like to have the multifamily deal in place prior to closing on the sfh

I’m looking to locate and control the multi family property in my area prior to closing on the sfh to avoid the 1031s 45 day rush

What are the best ways to move forward? Thanks for any dialogue 

[Dave Foster]

@Ryan Hall, Heaven only knows what he was talking about.  The IRS is not especially fond of wink wink and has little tolerance for "cheeky".  I'm sure it was a nice and fluffy sound bite!

@Joseph Gozlan makes a good point about being careful in a hot market.  And entering MF at this stage of the game is like jumping into the volcano.  So  you're wise to get control of the new property before you sell the old property.  You can do this with a purchase contract contingent on the sale of your old property to accommodate a 1031 (not as likely) or a sales contract with a floating close date dependent on finding a suitable replacement property (much more likely).  

You can also look into a reverse exchange where your QI takes title to the new property where you control it and have use of it while you sell your old property.  

Whether to refinance or sell is always a situation specific question.  But I'd have a hard time finding a reason to keep and refi a break even rental.