Updated about 3 years ago on . Most recent reply
When to do a 1031 exchange
Hello All,
I have a rental property (cabin) that does well, but it has some overhead that I want to get away from. HOA fees, propane fees and the location could be better. This house is also at the point that it needs upgrades. I am not against upgrades but is it better to invest 30k back in or 1031 up? With rates being higher I will lose cash flow but I can refi if rates drop again?
I have about 300K in equity if I do a 1031. I want to buy a newer property with a bit better location, no 4,000 a year HOA and no 3,000 year propane bill lol
What do you think? I ran numbers and my cash flow is reduced because of interest but in the longer game I think I could take advantage of the equity..........
What would you do?
Thanks so much!
Stephanie
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- Qualified Intermediary for 1031 Exchanges
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@Stephanie Peterson, those are great analysis points. The cute phrase running around BP is "Date the rate and marry the property". Interest rates will go up and down. A property will not change. If you have a good "why" to sell this one then that is probably the right thing to do.
In your case you've got a couple - looming cap ex, potential better cash flow with a better rental profile, and even better cash flow in a later refinance. $7K a year to dump an HOA and get rid of a propane bill sounds like a winner by itself!!!
- Dave Foster
