Alabama investment option - analysis paralysis- help!

[Robert Duffer]

I'm at the crossroads and have to decide today...I have a couple of properties in Birmingham area Alabama selected for a 1031 exchange, I have one or two more I can add and am in analysis paralysis between selecting in a nice neighborhood (different than my others) in Birmingham area or selecting in Huntsville (nice area too) - I have to try and make a choice sometime today or the weekend) - any advice or thoughts? 

Analysis paralysis is real...LOL Help!

Thanks in advance, Rob

[Dave DeMarinis]

I love Huntsville. I invest and lend there. I prefer 35805 over 35810. I haven't invested in Birmingham but if you can find a deal in Huntsville, the growth of income, jobs and population expected should lead to it outperforming Birmingham. However, it is easier to find deals in Birmingham by most opinions.

All that said, I feel strongly the team is much more critical than the area. I also think the market is moving so quickly, you do need to get in contract or you will lose the properties. I would quickly work on identifying a property manager and rehab resources if required and reach out to the relatives. Determine where you will have the best people and pull the trigger.

One backup plan (assuming most of your "gains" are Capital gains and less depreciation recapture) is to invest in an Opportunity Zone Fund. You invest only the gains and you'll defer cap gains until 2026 and reduce them by 15%. The great news is the upstream profit on the OZ is totally tax free after that. Of course, you then need to find a good OZ fund to invest in but it is good to have options.

One thing I learned when selling to a tenant and wanting to exchange downstream is to negotiate the contract with your tenant and tell them you will execute as soon as you identify the downstream leg. It requires a reasonably strong buyer to know they can pull the trigger when you are ready but it really relieves the 1031 timing pressure on you. A thought for next time.