Is this a valid strategy?
Aloha BP!
Living in Hawaii is great and I couldn't imagine my family living anywhere else. But when it comes to starting a portfolio of rental properties, it gets really expensive to do so. Instead of investing in my "own backyard" I've started to look out of state with turnkeys. Currently, I'm in the process to close on my very first deal sometime next week and I am stoked but I don't want to stop there or be comfortable.
I've thought of a strategy and I'd really appreciate the community's feedback. My plan is to purchase a few turnkey properties, use the cash flow to pay down their respective mortgages, then 1031 exchange them into a MFH complex. I see the value in owning a single MFH versus multiple SFHs and would like to pursue that avenue instead, eventually. There is something I am unsure of such as the 1031 process. Would the properties need to be free and clear in order for the 1031 to execute or is simply owning, say, 10 turnkeys at $100k each sufficient enough to 1031 then purchase a larger MFH. I apologize for my inexperience and I value everyones feedback/opinions.
In building my portfolio, I want to continually think of ways to gain traction and accelerate towards my financial goals. I don't need the cash flow so putting it towards the mortgage isn't an issue for me. My plan is to speak with a CPA (which I will do shortly thanks to another BP member here for providing me a contact) to speak about this strategy but I wanted to present this to the community first. Thank you all in advance, ALOHA!