Introducing myself + wondering how to strategize a 1031 exchange

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Introducing myself + wondering how to strategize a 1031 exchange

Patrick Gregory
Attorney · Springfield, VA · Member since 2022 · 5 posts · 8 votes

Hi everyone,

Trying to spend a few minutes each day on here to learn as much as I can. 

I live in northern VA, have been househacking for five years and also have a paid-off condo about two hours away that hasn't appreciated beyond inflation since I bought it 14 years ago.

I recently signed a tenant for another year in the condo. Being a landlord for 12 years has been fine, but the COA fees etc. mean it isn't giving me a great ROI.

So once that lease ends next year, I'm planning to do a 1031 and exchange the condo (worth about $250k) for out of state (or at least out of area) multifamily or SFH to rent out. Still learning about markets so haven't narrowed down where yet. So far I've looked a bit at Alabama, Columbus, Indy, Norfolk, Memphis, Detroit.

Wondering what my 1031 strategy should or could be - one thought is to pay cash for a couple of properties, and later get loans on them to finance more purchases. 

But I'm more interested in making connections with people here and continuing to learn over the next year!

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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
4y

@Patrick Gregory, One thing that isn't talked about much is the impact that depreciable basis can have positively on your tax return.  If you've been renting that condo out for a while you've seen how it reduces your taxes.  The 1031 exchange is ideal for increasing your depreciable basis because it lets you use the proceeds as down payments on larger properties or multiple smaller properties that total more.  Every dollar you buy more than $250K is another dollar you get to depreciate on your taxes.

And it's another dollar of loan that is amortized by the tenant. So even though it is more difficult to find lucrative cash flow ROI these days, the 1031 lets's you upgrade into a much higher blended IRR return. You just have to be patient to get the benefit of some of that return. Which sounds just like the type of investor you've been.

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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    4y

    @Patrick Gregory, One thing that isn't talked about much is the impact that depreciable basis can have positively on your tax return.  If you've been renting that condo out for a while you've seen how it reduces your taxes.  The 1031 exchange is ideal for increasing your depreciable basis because it lets you use the proceeds as down payments on larger properties or multiple smaller properties that total more.  Every dollar you buy more than $250K is another dollar you get to depreciate on your taxes.

    And it's another dollar of loan that is amortized by the tenant. So even though it is more difficult to find lucrative cash flow ROI these days, the 1031 lets's you upgrade into a much higher blended IRR return. You just have to be patient to get the benefit of some of that return. Which sounds just like the type of investor you've been.

    The 1031 Investor5134 Reviews
    WebsiteView Page
    2Reply
  • Julio GonzalezPro Member
    Specialist · West Palm Beach, FL · Member since 2008 · 4k+ posts · 1k+ votes
    4y

    Welcome to BiggerPockets, Patrick! You found the right place for information.

    561-253-6640
    1Reply
  • Justin WindhamPro Member
    Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes
    4y

    @Patrick Gregory

    Welcome to Bigger Pockets!

    If you are looking to invest into real estate, I have found this site to be incredibly helpful.

    I really like the alerts feature that can quickly guide you to current topics that might interest you: http://www.biggerpockets.com/alerts

    If you haven’t checked it out already, the Bigger Pockets blog features links to their awesome podcast and many great articles: https://www.biggerpockets.com/renewsblog/

    1Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    4y

    @Patrick Gregory

    You might want to follow the "Deep Dive" series we're doing on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:

    https://www.biggerpockets.com/...

    [email protected]248-209-6824
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  • Sean RooksPro Member
    Rental Property Investor · High Point, NC · Member since 2017 · 272 posts · 304 votes
    4y

    Since you are in Northern VA, Hampton Roads might be a good market to invest in. Still seeing cashflowing multifamily and STR's here, plus its close enough to drive to or use as a second home for your vacations.

    1Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    4y
    Quote from @Patrick Gregory:

    Hi everyone,

    Trying to spend a few minutes each day on here to learn as much as I can. 

    I live in northern VA, have been househacking for five years and also have a paid-off condo about two hours away that hasn't appreciated beyond inflation since I bought it 14 years ago.

    I recently signed a tenant for another year in the condo. Being a landlord for 12 years has been fine, but the COA fees etc. mean it isn't giving me a great ROI.

    So once that lease ends next year, I'm planning to do a 1031 and exchange the condo (worth about $250k) for out of state (or at least out of area) multifamily or SFH to rent out. Still learning about markets so haven't narrowed down where yet. So far I've looked a bit at Alabama, Columbus, Indy, Norfolk, Memphis, Detroit.

    Wondering what my 1031 strategy should or could be - one thought is to pay cash for a couple of properties, and later get loans on them to finance more purchases. 

    But I'm more interested in making connections with people here and continuing to learn over the next year!


     I think it is definitely important to identify your market. Start running numbers on properties you could see yourself buying. That way when you are ready, you will know when it is a good deal. Build your team in the area you want to do the 1031 exchange. I know you said you were looking into Columbus. I think here would be a great place to invest. The price to rent ratio makes for great investments. Not to mention our appreciation has been 8% higher then the US national average, because of the high demand for affordable housing. If you have used all of your tax benefits from the condo and it is not making you much, then why wait to sell? 

    1Reply
  • Alex Evans
    Memphis, TN · Member since 2022 · 230 posts · 99 votes
    4y

    Hey @Patrick Gregory

    The Memphis market is a great market to look at when you are looking to do 1031 due to the value that it provides. Your dollar is able to go a long way here in town compared to other places. I would be more than happy to discuss 1031s and the multiple strategies with you, as well as the benefits of the Memphis Market. Feel free to reach out at any time!

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    4y
    Quote from @Patrick Gregory:

    Hi everyone,

    Trying to spend a few minutes each day on here to learn as much as I can. 

    I live in northern VA, have been househacking for five years and also have a paid-off condo about two hours away that hasn't appreciated beyond inflation since I bought it 14 years ago.

    I recently signed a tenant for another year in the condo. Being a landlord for 12 years has been fine, but the COA fees etc. mean it isn't giving me a great ROI.

    So once that lease ends next year, I'm planning to do a 1031 and exchange the condo (worth about $250k) for out of state (or at least out of area) multifamily or SFH to rent out. Still learning about markets so haven't narrowed down where yet. So far I've looked a bit at Alabama, Columbus, Indy, Norfolk, Memphis, Detroit.

    Wondering what my 1031 strategy should or could be - one thought is to pay cash for a couple of properties, and later get loans on them to finance more purchases. 

    But I'm more interested in making connections with people here and continuing to learn over the next year!


     I would coordinate with your 1031 specialist and a great lender.

    I know some people that have sold large properties in California to 1031 into multiple properties in Columbus, Ohio

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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