1031 vs HELOC or Cash out refi etc.

[Ken Virzi]

So I know the power of the 1032 exchange, and many have used it successfully and swear by it. But I have been thinking through the pros and cons and in general just don't think it is compelling enough.

Assuming I have $100k equity in my place, if I sell I get at most $100k but most likely there are other fees, be it  selling through an agent, or title fees etc. So lets just say I would get around $90k to work with. So I leverage that $90k and buy a larger property.

Or, I take out a HELOC on that $100k and get $80k to work with. So that would be $10k less thus meaning I could use that $80k to get a larger property but maybe not quite as good as the one I bought using my $90k. However I would keep my original property that would continue to generate income. Also, if a large portion of the equity is due to appreciation, then the property is a good market and that $10k I missed out on may come through appreciation in a year.

Both pathways would grow my portfolio but it seems to me using the equity in my property while keeping my property would actually grow my portfolio quicker. I prefer the HELOC as well since I can keep using it over and over. Assuming I am able to pay back the $80k in less then 10 years, but even if I take the entire ten years, the pay off leads to opening up credit that can be used for purchasing more properties. Say after 6 years I have freed up $40k, I could immediately use that for another property.

There are so many different ways to go about the same goal and that is part of what I love about real estate, but as for me, not sure I will ever use a 1031 exchange. Then again, never say never.