1031 into a BRRRR

[Joey Samudio]

I'm doing my first 1031 exchange and will be netting about $200k. I am planning on using it to buy multiple properties in AL, TX or OH and wanting to use the BRRRR strategy on these homes. Looking for some advice on how 1031 will view rehab costs/ ARV on something like this?

[Dave Foster]

@Joey Samudio You want to keep in mind the reinvestment requirements when doing a 1031 exchange. In order to defer all of the tax you must purchase at least as much as your net sale, and use all of the proceeds in your exchange.

If you want to make improvements on the replacement property you will need to either have the cash set aside to make the improvements, or after you complete your exchange immediately do a cash out refi one of the properties to access some cash. 

An improvement exchange is also another option like @Jason Wray said here. Since you can't make improvements or exchange into property you own, your qualified intermediary would take title of the property while you  make the improvements. You would still have 180 days to complete the improvements and take title to the replacement property.