Using a 1031 as a down payment

[Douglas R.]

Hi, everyone. This is just to get a sanity check on an idea. After paying off the debt owed on a property I will be getting $7.6m in six months and am considering using that in a 1031 Exchange as a down payment on a $25-$30m loan to purchase a portfolio of apartments. I am thinking three apartment buildings (professionally managed Class B/B+, Cap Rates 7+, 95% or more occupancy rate) each located in a solid neighborhood in a separate city in NW Washington (one in Seattle, one in Bellevue, and another in Olympia or Tacoma). I wouldn’t need to derive personal income from these investments, as I would put all profits into servicing the debt more quickly and/or investing back into the buildings. I am somewhat nervous about taking on such a huge amount of debt, though, even if the down payment does afford some cushion. Do you think a little over 25% down payment would be sufficient for a potential $30m portfolio purchase? And does a 1031 allow for such a “down payment” arrangement? Thanks!