First 1031 Exchange - Looking at a variety of markets

[Breanna Green]

Hi BP people! I have bought and sold a few houses but first time doing a 1031 since saving on cap gains makes sense. I have approx $500k+ to play with and looking at San Diego, LA, Scottsdale, and New York. Most options are 1bd/1ba and just wanted to know if anyone had some specific area knowledge that might help! I am familiar with the first three since I lived in each but not NY although I always wanted to own there and I'm there about 50% of the time (currently live in DC). I own two homes in San Diego and one in Scottsdale - do I branch out or stick to what I know? LA didn't have as much of an upswing in home values over the last ten years compared to the other areas but I also don't want to buy at the top of the market (which is San Diego right now, although may be doubtful it decreases - some places up 110%). Thanks!

[Bill B.]

You’ll need some details. It sounds like you’re selling for $500k after closing costs? (That’s how much you have to spend. Selling price minus selling costs.). How big a loan will you have to get? (Net selling amount minus all cash you’ll receive from sale that must be reinvested.) are you looking to buy the same price property as you’re selling? (Anothe $500k property?) are you selling a property in CA? (If so they will require you to submit forms every year until you sell so they can collect their state income tax on top of any state income tax where you buy.) Obviously get a QI involved before the sale as early as possible. Your 3 options are 2 of the most restrictive in the country and own of the least. Of them 3 i think most would say AZ. This is your chance to pick a state with no income tax if you wish to avoid that in the future. Good luck. 

TLDR: Figure out your net selling price to know the minimum you have to buy. Figure out target price of replacement property. That will help you Figure out how big a loan you’ll have to get unless you plan to add cash. Try to have your replacement property identified if not under contract by selling time. Reach out to someone like @Dave Foster to avoid making a costly mistake.