Where would you 1031 $300k into for the most cash flow, without any other reserves?

[Ellie Narie]

I'm thinking of investing into the Cleveland area because it seems like that will get me the most cash flow. Thought about doing many mortgages, but perhaps it's not a good idea if I don't have much in other reserves sitting around. So maybe I would just buy a few SFHs and take home the full cash flow. Any other ideas or good areas to invest into? 

[Dave Foster]

@Ellie Narie, one strategy that many of clients have done might work for you as well.  Rather than going with many mortgages (and the time pressures of the 1031) and instead of just going all cash and limiting your purchasing power and ability to capture additional depreciation, amortization, and appreciation.  You perform a a hybrid 1031 I call recession proofing.

If your sale was $300K cash and not debt.  Then buy a couple of properties.  Purchase one property for $250K cash.  And purchase a second property using the$50K as a down payment.  Look at what happens

1. You own one property free and clear - no risk of market downturn.  Just keep the taxes paid in the worst event.

2. You have a property that you get to reap the amortization of the tenant paying off your loan.  

3. You purchased much more than you sold - so you get additional depreciable basis.

4. You still have concentrated equity.  So any time in the future you could refinance the free and clear property and use the proceeds (not taxable) to purchase your next income property.  Done this way there is no stress of the 1031 calendar.