Buy multiple SFR or MFR with a 1031 Exchange

[Israel R.]

Hi,

I am looking to sell one of my property's and use the 200k in equity to do a 1031 exchange. I am contemplating if I shoudl use that money to buy multiple SFR or 1 MFR. I am thinking the best approch is to use the 200k as a down payment and finance the rest.

I am looking at markets such as Indianapolis, IN, Kansas City. MO, and possibly St Louis, MO.

Does anybody have any thoughs or experience in those marketsl. Has anyone does this before that can help me figure out some of the details.

Thank you in advance and Happy investing!

Israel Robles

[Dave Foster]

@Israel R., Logistically speaking you'll be better off buying fewer properties with your 1031.  That eases the stress of the time limits and let's you select properties that truly fit your criteria.  In addition it let's you then take all the time you want to look for other acquisitions.

The way you can do this is because the IRS is requirement to fully defer all tax is that you purchase at least as much as your net sale and you use all of your proceeds in the next purchase or purchases.  So you can allocate your proceeds any way you choose as long as you use them all and purchase at least as much as you sell.  

We don't know what your selling price is but for example assume your selling for $500K So buy two properties to complete your exchange. Purchase a $100K property for cash and use the remaining $100K as down payment for a property worth $400K. You've completely deferred all tax. You've actually mitigated a lot of risk by having an all cash property on the sidelines. You've increased your ROI by having a highly leveraged property. And you can now refi at will and use the cash as a down payment on more properties as you find them without the stress of the 1031 clock.