1031 exchange, or hold, refinance? what would you do?

[Elaine Lau]

hi everyone,  I am a newbie in bigger pockets and in real estate investment even though I bought two rental properties a few years ago.  I have been reading a lot and watching many youtube videos to learn about real estate and hoping to find my financial freedom ASAP!

I came across a topic - the 1031 exchange - and would like some input on how I could take advantage of it.  I acquired a property in Las Vegas, NV in 2009. Purchased at 320k with 20% down.  Now renting out for $2485.  My mortgage payment each month is $1850. Remaining balance is about $230k.  If the current market value is 380k to 400k, may capital gain would be 60 to 80k, right?  

I am debating on whether to keep the property for the cash flow or sell it and do a 1031 exchange.  And if I do a 1031 exchange, I would have to purchase another investment property of 380 to 400k. Or can it be more than one property with a combined value of that amount?   How and where would you guys invest with that amount?  

I live in Inland Empire now. I do not know the area too well, but I have not been able to find an area here with good cash flow.  Any advice will be greatly appreciated!

[Giovanni Isaksen]

@Elaine Lau sounds like you have the good problem!

Was just running through the numbers on a similar situation for one of my advisory clients. They bought an apartment building about 18 months ago and it's just now stabilized and performing nicely but received an unsolicited offer from another investor who was running out of time to select their 1031 'upleg' (replacement property).

What I did for them was conservatively model the next ten* years profit & losses, then took the Net Present Value (NPV) of the cash flows from those 10 years and compared it to the net after tax proceeds from selling or exchanging as well as what it would cost to get into another property that performed as well as the present one.

Even though the other party was getting desperate and was willing to pay a crazy price for a property in that area it wasn't crazy enough to sell it turns out. The biggest problem is that whether we did a 1031 exchange or sold it outright the likelihood of finding something priced to perform as well has really diminished in that market. You're market may be different so the only way to know is by running the numbers. If you want help with that I'd be happy to do the analysis and show you how to do it in the future.

Good hunting-