1031ing a house in California to...?

[Jonathan Levi]

Hi all!

New BP member here and excited to learn from you all. 

In 2009, I bought a townhouse in California for $590K.

Today, that house is worth about $1.4M, and I owe $370K on it.

It's bringing in $4,500/mo, but after $2,430 mortgage payment, $200 HOA, and ever-increasing property taxes, my ROE is really quite pitiful.

Furthermore, my tax situation in the country where I live (outside the US) allows me to sell the property without being taxed here on the gains, but only if I act in the next few years.

Thus, I've decided to 1031 the property.

Now, I'm looking for suggestions, guidance, and experiences from folks who've done something like this.

A few criteria:

• I care about cash flow, not appreciation, at this point
• I visit Phoenix and Newark a lot, so I'd considered those as markets, but I'm not sure how to evaluate them
• I was thinking to buy a large apartment complex... but not sure if that's the right move as opposed to multiple properties.
• I have considerable amounts of cash that I can invest into the new property if needed, though I might just invest that into other projects separately
• I'd like to move this new property into an LLC to help protect my other assets, but I have heard that would be very challenging

Appreciate any thoughts or guidance anyone can offer!

Warm regards

[Brian G.]

@Jonathan Levi dude that's awesome that your property has skyrocketed! Not sure about where you should roll your capital but if you have any 1031 questions in the process 

@Dave Foster is the resident BP authority, a 1031 QI and can answer any questions you have along the way. Personally, I would start by consulting him to see what wisdom he has gained in working with many people who have done what you are wanting to do. What a great "problem" to have! 

Ok, I do have one piece of advice. Whatever direction you end up pursuing, the quality of the asset (ie market, location & desirability) is the most important consideration imo. This is one thing I've learned from @Ben Leybovich. Invest in something that will protect your capital first by choosing a quality asset which is NOT going to be the cheapest purchase price/per unit price nor will it be the highest cap rate you can find. Remember, the higher the cap rate the more risk that represents. Go get em!