Should I sell now? Need to do 1031 exchange... Or wait?

[Mary Jay]

Hi guys,

I have a couple of houses that I would not mind to sell.

1) One is about 100K (100 year old house in Idaho, 1 bdr 1 bath, have a hard time finding good tenants, mostly college town so the tenants are mostly college students who are not really reliable, forget to pay utilities, I get cancelations of services notices, its not so great when during winter your utility company send you a notification like that). Anyway, I dont have issues like that with my 3bdr/2bath houses because those are usually not college students rentals. The house is paid off, worth 100K, I make anywhere from $400-500 in rent on it.

2) The other house is anywhere from 160-190K in Mississippi, too close to the ocean.  I bought it for our  retirement but my significant other changed his mind and does not want to move there anymore. My mortgage on it 1.5K and the rent is 1.1K=not a good investment.

I don't want a rental that close to the ocean (10 min walking) if I am not moving there myself.

So I wanted to sell.

The problem is, there is nothing to buy so I could do the 1031 exchange...Or if there is the prices are ridiculous!

Should I sell now? and buy?

Or wait?

[Dave Foster]

@Mary Jay, That's a conundrum.  Because what you have certainly isn't working for you.  But you've already admitted defeat on finding a replacement that works.  Maybe go back and re-examine your reasons for selling those properties

1. You're losing money every month

2. Your tenants are bad

4. One of them is a hurricane magnet

5. The other one is a capital expense nightmare waiting to happen (my interpretation)

If you sell those what are the odds that you could at least find a property that 

1. Cost you a little less each month

2. Had a better tenant pool

3. Wasn't in the path of a hurricane

4. Didn't have as much potential for capital expenses as a 100 year old home.

Don't look at the price of replacements as much as you look at the cost of holding what you have.  And then adjust your expectations so that you improve your position.  This might be a better strategy than looking for the homerun 1031 replacement which doesn't exist now.  Take heart.  There's plenty of properties out there that can better your position.