Selling SFR to buy Multi-family

[Eileen L.]

For those that had SFRs and sold to buy a multi-family, when did you feel it was the right time to scale? I’ve considered selling a property later this year that has $240k in equity to buy a quadplex using a 1031 exchange. I'm looking for advice from those that have done something similar and if you'd recommend pursuing this. Thank you!

Property: SFR in Ontario, California
Rent $3200
Mortgage Payment (2.875% rate) - $2661.06 + $185 HOA = $2846

Mortgage Balance - $456k

Estimated Value - $700k
(3 bed/2 bath)

[Jake Andronico]

Quote from @Eileen L.:

For those that had SFRs and sold to buy a multi-family, when did you feel it was the right time to scale? I’ve considered selling a property later this year that has $240k in equity to buy a quadplex using a 1031 exchange. I'm looking for advice from those that have done something similar and if you'd recommend pursuing this. Thank you!

Property: SFR in Ontario, California
Rent $3200
Mortgage Payment (2.875% rate) - $2661.06 + $185 HOA = $2846

Mortgage Balance - $456k

Estimated Value - $700k
(3 bed/2 bath)

Congrats on your equity! That's a great place to be. 

I'd recommend speaking with a QI (Qualified Intermediary) and CPA about the 1031 exchange process. 

I'M NOT A CPA, but: You will need to replace the value of the debt when doing a 1031 exchange. 

This can either be done in cash or through another loan. If you're swapping debt at 2.875% for 7%+, don't expect cash flow. 

So, if you 1031 into an asset worth $700K or more to fully defer taxes, you'll have around $240K or so to put down (there are fees and deductions so these numbers are general). 

Hope this helps. Best of luck to you!