Help deciding right 1031 Exchange Strategy

[Ben Moore]

I am looking into doing a 1031 exchange on a property I have in the norfolk/plainville/wrentham area of MA.     

I have got pre-approval on loan and have spoken to a qualified intermediatory and all is in order.  

My questions are around - with appoximately 400K in equity what should I be looking to do, given I am somewhat risk adverse. 

The reason for doing the exchange is:

(a) Property is getting old and I am tired of managing.

(b) The depreciation benefit is low compared to income I get.  So would like to increase depreciation base. 

(b) Like many, I have great long term tenants and never properly increased the rent.  I could do, but at this stage, reason (a) is the primary reason for doing the exchange. 

I am looking for one or two units that are:

(a) Within an area where there are good property management companies.  Not many options out where the unit is. 

(b) provides a positive cash flow and ROI on the sunken capital ($400K)

The questions I have.. 

1.  How many units should I look at doing ?

2.  Is Short Term rental a better option than long term 

3.  How best to calculate how much capital to put into each unit. 

I guess, I am really looking for someone in this area, that could help discuss / guide (I am willing to pay).   I do have some additional complexites (all good) that I don't want to list here, but they do have a positive impact on my real estate "empire" of one unit :)  

Thanks in advance.

[Colin Kelly-Rand]

@Ben Moore

I am in the same boat in the Greater Boston area. Unfortunately (or fortunately) the prices in the Boston market do not yet reflect the higher interest rates. I have been looking recently in Providence and other markets (Framingham, Everett, Lynn) etc that I may find higher cap rate transactions and greater number of units (5+). 

I am predicting I will have 400-600k in equity after the 1031x. Ideally I can purchase a $2M property at a 7 cap. Also, not sure if you know 1031's well, I believe you can hold some of the 1031 funds in escrow for repairs that must be completed within 180 days of purchase. For example if you buy a property that needs work you can reserve some capital post purchase, spend on repairs increasing the value and then hopefully refinance afterwards. Easier said than done, however its nice to have options when their are so few pickings. 

Also, I am a commercial debt broker - so if you are curious what local banks are offering for commercial rates etc send me a DM. 

Cheers, 
Colin