Selling: 1031 vs. Personal Residence

[Adrian M]

Hello Fellow Investors!

I would really appreciate your advice on this matter.

Background Information
I own a condo in Santa Monica, CA that I am currently renting-out. I'd like to sell the condo in 2 or 3 years (after a bit more appreciation).

The condo is in a nice area. Although the condo is small (in sq footage), I wouldn't mind moving back to it if it makes the most sense financially.

When I eventually sell, I will use the equity to buy about 5 or 6 SFRs, in cash-flowing states (not California).

By the time I sell, I will have about 7 properties. So, the acquisition of an additional 5 or 6 will put me over the 10 property Fannie Mae limit.

Essentially, I am trying to decide between the following strategies.

STRATEGY A - 1031
Continue to Rent the Property to Tenants.

Then, in 2 or 3 years, do a 1031 into SFRs in a cash-flowing state (not California).

Pros
- I can avoid Capital Gains Tax on all of my equity.

Cons or Concerns
- I have never done a 1031. I'm concerned about hidden fees, the strict 1031 timelines (45 days to identify, 180 days to close). I'm very concerned about Underwriting 5 or 6 Loans at the same, especially since I will be going over the 10 property Fannie Mae limit.

STRATEGY B - Owner Occupied Capital Gains Exclusion
I would move into the Condo (and use as personal residence).

Then, in 2 or 3 years, use the Owner Occupied Capital Gains exclusion.
- I'm single, so this exclusion would be $250k.
- The equity in the property is currently about $250k.
- I expect the equity to be more in 2 or 3 years.

Pros
- This will allow me more time to find the properties that fit my investing style.
- I could possibly take-out a Home Equity Loan (or Line of Credit) to buy more cash flowing homes now. Are Lenders making Home Equity Loans again?

Cons or Concerns
- Equity over $250k will be taxed.

Please share your related knowledge/experiences. Any advice

offered will be appreciated!! Thank you for your time!!!