1031 into increased cashflow: remote Turn Key vs Local BRRRR?

[Michael Penwarden]

Hi -- I'm new here and just getting to know my way around, but figured I'd jump in and ask the community for advice/opinions on my situation:

I have a SFR rental property that I've been holding since prior to the downturn. It is not cashflowing, and I have the opportunity to sell it to my tenants. I've spoken to my CPA and -- cutting to the chase and factoring in passive losses, etc -- if I were to 1031 it into different investments, I'd need to spend about $100K of equity against about $300K of debit (for a total of $400K) in order to qualify for a "like" property and avoid capital gains.

What I'm looking for are thoughts on the best strategies moving forward. My goal is to parlay the money into investments that 1) are reasonably stable while 2) providing good cashflow and 3) begin to build a more thoughtful/strategic and lucrative REI portfolio. Another factor is that I am now also able to play a more active role in building my portfolio than I have in the past, time-wise.

What strategies would you focus on?  

I am attracted to the BRRRR model -- it seems like an intelligent way to methodically build a good-sized portfolio by reinvesting my original equity over and over, but I also acknowledge that there's a lot to learn. I would be either focusing in Reno, NV or in the Roseville/Sacramento CA areas, where I could oversee/manage the process and could then be my own property manager.

On the other hand, parlaying my existing equity into a portfolio of 3-5 cashflowing properties in the $100K range (with 20-25% down) in other parts of the country -- places like Memphis, KC, Charlotte, etc -- is attractive because if I get in with the right Turn Key companies I could use my cashflow to continue to acquire additional properties over time and leave the details to the professionals.

Are there other strategies I should consider? SFR vs MFR? Are their pitfalls in either of these strategies that I should be especially wary of? It seems that figuring out how to finance a BRRRR (purchase plus repairs) via a 1031 would be more complex than simply working with an established Turn Key or two in attractive markets, but would it be worth it in the end?

Thanks -- I'm glad to have found BP and look forward to learning from you as I continue to think this through!