Thoughts on Doing a 1031 soon

[Michael Win]

I just purchased a duplex 3 months ago.  Bought for 169K, Loan left of 110K.  I would like to sell the duplex for 210K.  I am sure I can get this price as a duplex down the street in worse condition/lower rents just closed for right at 210K.

I want to do a 1031 and put the 100k down payment into a 4-500K property (financed) which should get me 2-3X better cash flow.

The numbers makes sense.  Sure risk is more, but I am not risk adverse.  Does this seem like a good strategy or should I just continue to collect my $900/duplex as cash flow?

[Jennifer Lee]

Hi Micheal

I am currently doing a 1031, so I am not an expert.  @Bill Exeter is probably the person to contact on here.

I have similar concerns as @Jason Mak. I think you need to hold the property for at least 1-2 yrs. I think you need to show intend to HOLD the property. Proof that you intended to BUY HOLD, not FLIP.

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We just sold our long-term buy hold out of state unit last wk, now we are looking for replacement.

The amount of DEBT we need to incur is our handicap. we made almost 100% appreciation and the market in my area is "cheaper".  I am having a hard time finding something that can service that new debt.

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to explain numbers work for me, I won't put our exact #:

We bought our unit for  $450K (2001) and sold it for $850K (2015)

It had a HELOC (home equity line of credit) which helped me buy 6 other units in its 14 yrs of ownership of $300K.

Making our Proceed about 550K (You have to take into account all the closing cost, I m just using simple math)

Originally I thought that only need to find something in the 550K, which was easy here and incur no debt.... BUT BP corrected me, if I did that I have to pay capital gain on the $300K. It's Called a BOOT.

So, we have to buy something in the 850K range, if we want to defer all the tax.

And the only thing that can service that kind of debt here is a $1M property... LOL I have to take on $500K debt......

To be continued...LOL 

Fingers crossed:

it's either buy  one $1M commercial bldg, (Cash flow, but incur a lot more debt)

buy multiple multi units, and end up with 20+ doors in a short period of  time barely cash flowing, with $300K mtg to service

buy multiple single family, and end up with a handful of property and barely cash flow with $300K debt

It's a good problem to have, but still a problem hahahaha