All Forum Posts by: Wendy Stclair

@Steven Whalen well, do you have debt on the current property? if so you'll need to  REPLACE THAT DEBT with your 1031.  With a 1031 there are a lot of tricky lil rules. First you must NOT ONLY buy a new property valued at least the value of your sold one ($405k) but need to replace the debt you have on the old property with equal debt on a new loan! So in your case, if you bought initially for $204k and let's say you put 20% down initially so you still owe just under $160k (I don't know what you owe on it), your situation would look something like this: 

- total value of new RE you need to buy: MINIMUM $408k (can be much higher) 
- total debt: $150k (or whatever you still owe on the old property)
- total equity you need to reinvest as cash in the deal: $258k MINUS whatever closing costs you had on sold property so likely $220k cash or so

In theory you can buy much more than a $408k property because you can use that equity (cash) to put more down and keep your debt of 20 - 50% and still come out cash flowing well. I've been playing with these levers a bit -- right now I'm likely going to buy some properties at 30% down and then purchase at least one property in mostly cash that later i can use to cash out refi if i want to buy more RE later. 

I'm just starting to do business with them out as an investor in their Bennah Oaks project (Okala FLA) and also Nathi townhomes in Palm Bay. I've had only good experiences with them to date. They have been up-front and honest with me about a 1031 issue i had and even offered me alternatives / an out when timing got sideways.  I met them and felt good about my interactions with the team. They may have growing pains issues - I cannot attest to anyone else's experience  but as of April 2022 I feel like things are going in a good direction with the new build properties he is developing and he has been genuinely interested in my success with his company. 

Hi all! 

I'm on a whirlwind education of 1031 land and have been analyzing how to maximize my results on a recent sale. I'm curious any sage advice on my approach, from those of you perhaps more seasoned here... 

SOLD: California condo for $700k with $287k in debt and $387 in equity.  Need to ID properties by May 26, close by Oct 8.

CONSIDERATIONS: 
1) the California "clawback" law will follow my properties til i sell them to get their money eventually so fewer properties may be better.
2) i've got great credit but I'm not W2 employee, everything is C Corp for me right now. So non-traditional financing only
3)  I live in California but don't want to invest here due to taxes, prices, and tenant first approach 
4) I love turnkey and have 6 other SFHs now because I'm a solo out-of-market investor but wanted to "step out" and possibly make a break for more meat on the bone with this 1031 
5) I've been looking for multi-family but have struggled to find anything i could make work for multiple years as an out-of-state investor and keep ending up back with SFH and duplex
6) My top goal is cash flow so that i can step away from working a day job so hard and work more on real estate projects and enjoying life! 

WHERE I'M AT TODAY 

Initially when i envisioned my 1031 future i wanted to buy AS MANY PROPERTIES AS I COULD and leverage DEBT to get my cash flow up and build equity over time.  

But as interest rates have sky rocketed, prices doubled and i learned about California's clawback rule, I've started to see maybe my best approach is just get 3 properties and put 30% down, 30% down and then 50% down on the last one to satisfy my cash down requirements.  This will get me to a $1M in property with $531k in debt. I'll have a steady $1780 cash flow from a $330 i had with the old property.  Is this a good approach?  Ciurious any sage advice! 

 This would look something like this:

I have an update on my post above re Bennah Oaks and the Wagner Nolasco team. I am a 1031 investor and initially signed with them for Bennah Oaks to hopefully invest with my 1031. Standard construction issues caused their project to push out a few months and California real estate being as strong as it is, my house sold in a minute. So I was left with 2 investments and nothing for my 1031. Wagner called me as soon as he knew and we talked - he offered to let me out of my contracts, and offered also 2 alternative properties to me he had on the side I could get right now - no pressure either way.  I crunched all the numbers, he gave me time to decide.  In the end, I decided to keep them both (outside my 1031) and take one of the NATHI condos in Palm Bay coming available this July for my 1031.   

I then visited last week both sites and his office in Orlando, meeting him and his team. The construction sites look very good. Okala is beautiful!  In their office in Orlando, the team was all very welcoming and happy to have me visit. They have a family-like comraderie.  Wagner had good rapport with all of them - he was very busy  but took time to sit with me for an hour, along with his team. They all appeared very genuine and committed to the success of their projects and the happiness of their clients. They will have for these new projects their own property management arm, an insurance option as well i'm told.   

So bottom line is my experience with Wagner and his team has so far been stellar. 

@Robert Gonzalez Well, I have 8 properties and I'm happy to handle any issues that break and ensure my properties are top notch so my tenants are happy to be there and take great care of them as a result. However, when the cost of lending erases the profits of owning, the issue isn't whether i can manage a broken appliance but whether its worth it to me to try to invest to begin with. I don't do this as a charity, and my time is worth money. You can say us smaller investors shouldn't be here to begin with, but as the smaller investors get pushed out and only the larger ones with the deep pockets remain, is that a good thing? 

I am in the middle of a 1031 exchange - it is my first! I was so excited to level up. I was in a similar situation to you, without the partner. I'm also looking in FLA as JAX, Cape Coral, Okala, Tampa areas have all been on my radar. You may also be more hands-on than me - I'm an out of town investor so BRRR is tougher and I look for more turnkey with upside over time. I need to replace $387K in equity and $276K in debt. But for what its worth, here is what I'm finding:

I'm 1 week post-sale and I can tell you it's a very nail-biting time to do a 1031. Interest rates are sky rocketing daily (I'm non conventional and staring at 6.5% after leaving a happy 3.65%). Insurance rates in FLA are up because many companies left there in the last few years due to hurricane issues. I'm finding the 1% rule is dead on potential properties and things are closer to .7% - .8% best case scenario for often-run down, overpriced locations. (I have a RE team in Cape Coral that is actively suggesting I purchase duplexes that cash flow NEGATIVE 245 a month and this just makes my head hurt) 

On the positive side, rents are going up, so if you buy right you can still get value, but its not easy to find ESPECIALLY IN FLORIDA. I'm still glad I'm doing it as i will be able to replace my single $700K value home with 4 or more others that will total $900k in value today and be able to leverage $500k in debt to earn what i'm calculating will be $2300 in monthly cash flow compared to the measely $350/mo i was earning previously. And I'll be getting out of California.  But this leap in cash flow is because I'm able to put so much more cash down on a couple properites to bring the loan down. BTW I initially wanted a small multi-family but I'm not finding these yet in my quest - a couple duplexes is more what I'm finding to fit.  

Either way ... the one thing I keep pondering is why I didn't consider more creative solutions to keeping my old condo and just take the equity out and NOT doing the 1031 -- like COULD you simply change the business model of the condo to be more profitable then take the equity out? Could it be a full time rental to reduce management fees or house hack it room by room?  This would allow you to keep the sweet low interest and still take cash and do what you want.  If not, maybe do sell and 1031 but just be wary of the pitfalls I'm mentioning above. Good luck!! 

I have three properties with CAPS in Indiana. I find them very responsive to my inquiries and thorough with their paperwork.  They do bi-annual property inspections of units which always uncovers something fairly major i then have to get fixed (ceiling falling down!???).  My properties tend to have a lot of maintenance issues in general and they do charge an 18% upcharge which can be a bit steep sometimes. I do have to ask multiple times for maintenance items to be addressed from the inspection report and I'm never really sure when they are done because the communication about status is not consistent or effective. I've been surprised on multiple occasions by a big fat bill on my ledger. When i query them about it, they are SUPER friendly and helpful and have the information, i just have to dig for it as they aren't proactive in outreach to me. And this is frustrating.  Also the caliber of tenant I have in at least one property (it could be the part of town I'm in - Hammond, Hobart, Laporte, IN) is perpetually VERY VERY late with rent.   

I'm curious how its going? i also have a property with Freaky Fast and i think they grew too freakin' fast for their bridges. I had issues priot to closing and i didn't really trust my gut.  And now a year later I cannot EVER get anyone on the phone or to reply to text or email, and I still don't have my 1099 for 2021 (it is April 18!).  The property management team has changed multiple times in the last year since closing, Jason Englemen seems the only constant. I've taken to texting and calling every week and cannot get them to call or write me back.  The good side is there has been ZERO maintenance issues at the property and all the rent has been paid on time for one property, the other is 1-month behind on rent. The bad side is I'M PRETTY SURE no maintenance means they've not even visited it.  I have great concerns about Jason's team - I really don't want to be skeptical here but I am. Thinking i need to find a different property manager but at a minimum my tax info for 2021. Is anyone else seeing this same experience? 

@Dave Foster thank you for these insights!!! I've been struggling with this same thing. Feeling better now about my 1031 and going to figure out the right approach now.

Yes they are up! i am an investor right now mid 1031 trying to level up my properties by selling a california one and going elsehwere. i'm not a W2 employee so my rates are always a bit higher and just today i learned rates are 7% for a loan for me, which ABSOLUTELY ERASES my cash flow gains when investing in new properties! 5 or even 6% i could deal with but now i'm not sure wth to do. i think b/c i can put more cash down i may be ok, but certainly this is not the retirement plan i was hoping for. I too feel priced out of the housing market i'm afraid! ugh!