The art of doing 1031

[Carlos Ptriawan]

one of the problems that I have to solve when doing 1031 is trying to analyze which market/sector will have equity appreciation better than the replacement property. So the IRR of the new property shall be higher than the IRR of the current property.
The covid times followed by interest rate bring up a very interesting real estate chart as some market keeps going up and some market started flattening/reducing.

I used ZillowEstimate and other RE valuation software a lot to analyze the market. For example, an SFR in CA that has a valuation of $800-$900k in 2019, the price is going up to $1.0-$1.2mil(depending on size and quality). However, after the interest rate hike, it seems the valuation went down to $850k-$950k. Meanwhile, a condo STR in another state that was priced at $180k in 2019, it is going up to $250k in 2021 and now $350k in 2022 ! The IRR for a particular area is amazing.

So if I wanna do 1031, it seems it's the best to do when a low-interest rate is available and then properly sell the house in the highest IRR, to be replaced later on with property that's projected to have a better IRR. This is very tricky.

From my own calculation and actual experience, replacing 1031 from a higher appreciation market with high cash-flow market is loser's game. Not worth the effort.  Replacing cf to cf market may be worth it. But the best is to replace higher appreciation market property with an even higher appreciating market like the sample above.

Second point, if I can download all ZHI data I can write software where to invest in the next best location although there seems software that seems can do that as well.