1031 Exchange / Multi- Family / 375k to Invest

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1031 Exchange / Multi- Family / 375k to Invest

Jacques Bailey
Investor · Miami/Houston/DC · Member since 2022 · 19 posts · 4 votes

Bigger Pockets Family-

Need a little help, better yet expertise. I currently have a Residential Investment Home that is currently on the market. After selling, I should walk away with about 375k to invest into another property. (Ideally Multi-Family) I struggled to find a bank to do a HELOC loan therefore had no other option but to sell :-(

I having a hard time finding the right opportunity (and Area) to focus in. I currently have strong ties to Phoenix, Miami, DC, Memphis and Houston so ideally would like to invest in Multi-Family in one of these areas. My previous property was cash flowing about $1675 a month or $20K a year.

My focus is to invest in the most amount of doors possible, in a Class B Neighborhood netting more than my previous investment. Looking for CoC greater than 12%.

I would like to make more than 20k a year off the investment, in market that has decent appreciation so that I can refi in a year or 2.

Where would invest? What strategies would you deploy? Who do I need to connect with for assistance.

THANK YOU IN ADVANCE! (banging my head against the wall- LOL)

1Reply
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
3y

@Jacques Bailey, This is indeed a transitional time in the market.  Many properties and classes of properties that investors prefer are still not penciling out with the impact of higher borrowing costs.  And many sellers are not interested yet in discounting to numbers that do work.

One thing you could do as your search becomes more urgent and you get a contract to sell would be to also look at the minimum purchase price you can make and still satisfy the 1031 exchange.  I know your goal is to get as many doors as possible.  But there might be some merit in getting the fewest you can right now.  The reason is that this will leave you with the greatest equity in your replacement property.  And equity equals borrowing power at a future date.  You will then be free of the 1031 timelines and can wait for the market to come down to what you want it to be.  Then you simply access your equity when you want.  And you'll end up with maybe more properties because you're buying them right instead of forcing the issue now just to satisfy the 1031.

Along with that option is one that several of our clients have done to mitigate risk.  Use your proceeds and buy two properties.  One with cash and one with maximum debt.  This also ensures that you meet the 1031 guidelines but have a debt free property free also of risk in a market down turn.  Yet with tons of equity available when you want to buy something else.

The 1031 Investor5137 Reviews
WebsiteView Page
6Reply
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  • Jack Seiden
    Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 656 votes
    3y
    Quote from @Jacques Bailey:

    Bigger Pockets Family-

    Need a little help, better yet expertise. I currently have a Residential Investment Home that is currently on the market. After selling, I should walk away with about 375k to invest into another property. (Ideally Multi-Family) I struggled to find a bank to do a HELOC loan therefore had no other option but to sell :-(

    I having a hard time finding the right opportunity (and Area) to focus in. I currently have strong ties to Phoenix, Miami, DC, Memphis and Houston so ideally would like to invest in Multi-Family in one of these areas. My previous property was cash flowing about $1675 a month or $20K a year.

    My focus is to invest in the most amount of doors possible, in a Class B Neighborhood netting more than my previous investment. Looking for CoC greater than 12%.

    I would like to make more than 20k a year off the investment, in market that has decent appreciation so that I can refi in a year or 2.

    Where would invest? What strategies would you deploy? Who do I need to connect with for assistance.

    THANK YOU IN ADVANCE! (banging my head against the wall- LOL)


    I’d personally eliminate both phoenix (seems to the epicenter of the housing bubble) and Memphis (don’t like investing in places with declining populations and limited appreciation potential.) Of the three remains houston probably has the best cash flow but since they build so much they’re the least appreciation, D.C. and Miami have less cash flow (and by that I mean D.C. is basically break even at best though you can get a multi at about 20% off peak prices right now.) but probably more appreciation in those markets at least until Miami ends up underwater lol.

    2Reply
  • Alex Olson
    Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    3y

    I would recommend going with an investment in a cash flowing market like KC. There are a lot of opportunities in this market and I can show them to you. It's a great market to 1031 Exchange in to as well because your return on equity is a lot greater than many other markets. 

    2Reply
  • Lauren CutchenBusiness Member
    Real Estate Agent · The Woodlands, TX · Member since 2019 · 188 posts · 79 votes
    3y

    Speaking for the Houston area. You won't find huge appreciation in a year or two. It'll be slow and steady. Rental market is strong here. Finding a cash flowing multi-family property in year 1 will be a challenge. You will have more luck in a surrounding area for cash flow. There's a chance you can force some appreciation by fixing up the property, raising rents, and refinancing later on. But again, this is the long game. 

    [email protected]832-406-4239
    Lauren Cutchen 513 Reviews
    WebsiteView Page
    1Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    3y

    You should also list the minimum price property you’re looking at. Unless your property was paid off. The $375k you’re “walking away with” isn’t the amount you have to buy.  You have to buy a property worth your $375k plus any loans paid off.  

    2Reply
  • Jacques Bailey
    OP
    Investor · Miami/Houston/DC · Member since 2022 · 19 posts · 4 votes
    3y
    Quote from @Alex Olson:

    I would recommend going with an investment in a cash flowing market like KC. There are a lot of opportunities in this market and I can show them to you. It's a great market to 1031 Exchange in to as well because your return on equity is a lot greater than many other markets. 

    Thanks Alex- for sure- let’s connect.
    0Reply
  • Jacques Bailey
    OP
    Investor · Miami/Houston/DC · Member since 2022 · 19 posts · 4 votes
    3y
    Quote from @Bill B.:

    You should also list the minimum price property you’re looking at. Unless your property was paid off. The $375k you’re “walking away with” isn’t the amount you have to buy.  You have to buy a property worth your $375k plus any loans paid off. 

     Thanks Bill! You’re right- I’m only looking at properties 500k+

    2Reply
  • Jacques Bailey
    OP
    Investor · Miami/Houston/DC · Member since 2022 · 19 posts · 4 votes
    3y
    Quote from @Jack Seiden:
    Quote from @Jacques Bailey:

    Bigger Pockets Family-

    Need a little help, better yet expertise. I currently have a Residential Investment Home that is currently on the market. After selling, I should walk away with about 375k to invest into another property. (Ideally Multi-Family) I struggled to find a bank to do a HELOC loan therefore had no other option but to sell :-(

    I having a hard time finding the right opportunity (and Area) to focus in. I currently have strong ties to Phoenix, Miami, DC, Memphis and Houston so ideally would like to invest in Multi-Family in one of these areas. My previous property was cash flowing about $1675 a month or $20K a year.

    My focus is to invest in the most amount of doors possible, in a Class B Neighborhood netting more than my previous investment. Looking for CoC greater than 12%.

    I would like to make more than 20k a year off the investment, in market that has decent appreciation so that I can refi in a year or 2.

    Where would invest? What strategies would you deploy? Who do I need to connect with for assistance.

    THANK YOU IN ADVANCE! (banging my head against the wall- LOL)


    I’d personally eliminate both phoenix (seems to the epicenter of the housing bubble) and Memphis (don’t like investing in places with declining populations and limited appreciation potential.) Of the three remains houston probably has the best cash flow but since they build so much they’re the least appreciation, D.C. and Miami have less cash flow (and by that I mean D.C. is basically break even at best though you can get a multi at about 20% off peak prices right now.) but probably more appreciation in those markets at least until Miami ends up underwater lol.

    Thank you! 
    0Reply
  • Raymond J. RodriguesBusiness Member
    Lender · Miami, FL · Member since 2017 · 1k+ posts · 797 votes
    3y

    @Jacques Bailey if you're looking to invest in the Miami area, reach out to @Malgorzata Sadowska! 

    [email protected]619-456-8311
    Helm Mortgage Corp.5126 Reviews
    WebsiteView Page
    2Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    3y

    @Jacques Bailey, This is indeed a transitional time in the market.  Many properties and classes of properties that investors prefer are still not penciling out with the impact of higher borrowing costs.  And many sellers are not interested yet in discounting to numbers that do work.

    One thing you could do as your search becomes more urgent and you get a contract to sell would be to also look at the minimum purchase price you can make and still satisfy the 1031 exchange.  I know your goal is to get as many doors as possible.  But there might be some merit in getting the fewest you can right now.  The reason is that this will leave you with the greatest equity in your replacement property.  And equity equals borrowing power at a future date.  You will then be free of the 1031 timelines and can wait for the market to come down to what you want it to be.  Then you simply access your equity when you want.  And you'll end up with maybe more properties because you're buying them right instead of forcing the issue now just to satisfy the 1031.

    Along with that option is one that several of our clients have done to mitigate risk.  Use your proceeds and buy two properties.  One with cash and one with maximum debt.  This also ensures that you meet the 1031 guidelines but have a debt free property free also of risk in a market down turn.  Yet with tons of equity available when you want to buy something else.

    The 1031 Investor5137 Reviews
    WebsiteView Page
    6Reply
  • Stephanie P.Pro Member
    Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
    3y
    Quote from @Jacques Bailey:

    Bigger Pockets Family-

    Need a little help, better yet expertise. I currently have a Residential Investment Home that is currently on the market. After selling, I should walk away with about 375k to invest into another property. (Ideally Multi-Family) I struggled to find a bank to do a HELOC loan therefore had no other option but to sell :-(

    I having a hard time finding the right opportunity (and Area) to focus in. I currently have strong ties to Phoenix, Miami, DC, Memphis and Houston so ideally would like to invest in Multi-Family in one of these areas. My previous property was cash flowing about $1675 a month or $20K a year.

    My focus is to invest in the most amount of doors possible, in a Class B Neighborhood netting more than my previous investment. Looking for CoC greater than 12%.

    I would like to make more than 20k a year off the investment, in market that has decent appreciation so that I can refi in a year or 2.

    Where would invest? What strategies would you deploy? Who do I need to connect with for assistance.

    THANK YOU IN ADVANCE! (banging my head against the wall- LOL)


     Consider Tyler or a similar Texas town or Kansas City or Pittsburgh.  All would support decent cash flow and get you more doors (certainly more than here in DC).

    0Reply
  • Dustin Street
    Real Estate Agent · Kansas City, MO · Member since 2022 · 147 posts · 40 votes
    3y

    @Jacques Bailey KC is a solid market for multifamily right now! Just sold a 4plex for $115k, just to give you an example of the kinds of deals you can find out here. It did need some work to be rental ready but will easily cashflow 3k a month. 

    1Reply
  • Virginia FranzeseBusiness Member
    Real Estate Agent · Member since 2022 · 71 posts · 28 votes
    3y

    May be too late now but this HELOC option has worked well for several of my clients...

    https://www.rate.com/heloc?loid=24045&emp-id=24045&adtrk=%7Cgnr%7Cguaranteedrate%7C%7C%7C%7C%7C%7C%7C%7Cdirect%7C%7C%7C%7C%7C

    1Reply
  • Jewell Vold
    Investor · Shawnee, KS · Member since 2022 · 15 posts · 7 votes
    3y

    I'd be happy to talk with you about some different options here in Kansas City.  :)

    0Reply
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