Pay cash or finance? - 1031 with proceeds going toward 2 properties

[Gerich Fellermann]

Hi all,

I am in the middle of a 1031 and am contemplating purchasing 2 properties with the proceeds of my sale ($600k).  I'm pre-qualified for ~1.25m

I have a property under contract in OR for $775k (A) which does not fully satisfy my reinvestment threshold and would leave me with a boot.

I am looking at a second property for $350k (B) in NM. 

I would be working with 2 different lenders so would potentially have 2 different loans

Question: How should I split up the downpayments to purchase both properties?  

Property A is the priority and will likely close first.  

Property B would cash flow and would help me avoid the boot.

Should I pay cash for PropB to avoid loan fees and potentially refinance costs down the line?   (also just for simplicity)

Are there tax issues to consider?  Other thoughts?

Thanks for any input,

G

[Dave Foster]

@Gerich Fellermann, If your lending will allow it's never a bad time to concentrate equity. This makes it that much easier to access that equity later. Because, as you know, a cash-out refinance is not a taxable event. So, purchase that second property for cash. And use the remaining of your 1031 account as a down payment on the first property. That free and clear property is now free from mortgage risk. And you avoid the cost of a second loan right now. But the equity is available to you at any time once your 1031 is complete.

You're handling your 1031 like a pro!!