1031 Exchange options.... what to do with my money??

[Sarah Smith]

I am an experienced real estate investor.  I own over 70 rentals, but have primarily had a buy and hold strategy.  My husband and I have been trying to build our residual income.  We recently sold an 8 unit apartment complex that we built.  We have about $160,000 in profit from that sale.  I have not done a 1031 exchange before, but I feel that reducing my tax liability is a good idea.  All 70 rentals that I own are located in Butte Montana.  I was born and raised there and know the market very well.  I have recently moved to Las Vegas, NV.  It is a very competitive market in Las Vegas but at the moment it feels stable.  

I am looking for thoughts and input on what I should do with this 1031 Exchange money.  Should I continue to invest in the market that I know, but is now a long distant investment?  Should I branch out to this new market in Las Vegas?  Should I try and purchase a much larger investment and use this money as the downpayment?  I have been listening to at least 3 podcasts a day from Bigger Pockets and my mind is reeling with all of the possibilities and strategies.  So many viable options and I guess I am just looking to learn and grow from someone that may have more experience and expertise in this aspect of investing than I do.  Any insight or thoughts would be much appreciated.  Thanks!

[John Woodrich]

To piggyback on a couple of comments here - you only have 45 days to identify the property you want to purchase.  I am not sure where you are at in this process but the clock is ticking!!  If you can't identify a property in 45 days you blow the exchange and your gain is now taxable.  The gain may also be larger than the $170k in cash so I would talk to your CPA to see your potential liability.  Would suck to blow the transaction and end up with a $100k tax liability leaving you only $70k to invest.

To the comment that you can't 1031 into a flip property - technically you can, you can exchange any real estate for any real estate.  However if you purchase a flip property and flip it - you will have to pay all the deferred tax upon sale as you can't 1031 a flip.  If you buy a flip property, renovate and rent it for a period of time this can work.

Last - I would confirm with your CPA the amount you need to spend to defer all gain.  If your old loan was $400k and your new loan is only $300k you have essentially received taxable boot...  These transactions work well if someone is going to step up into a larger property however they don't work well if there isn't a plan in place.