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Updated over 6 years ago on . Most recent reply
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Am i stupid to not do this?
Hello All,
I am currently going through growing pains in my knowledge of investing in real estate, for the past 12+ years i have bought 7 properties as primary residences when i would switch duty stations along my career. Each time i turned the property into a rental and hired a PM. Over the years i have been extremely passive with the business and never took the time to really learn how to property invest in real estate, i just assumed i was doing things correctly, i didn't know how to do the numbers, just went with the flow.
Since im down to 5 rentals and i made a very small amount of money selling off the negative cash flow rentals that just never recovered from the market crash in those 2 areas, since i bought to high in the peak of the market prior to the crash. i decided to apply for a mortgage to purchase another rental in my local area using some of the new knowledge i have learned recently, but after applying for multiple mortgages most of the places i applied basically said no, that cash flow to money lent to me is in a risky zone, basically i own properties that were not bought with rental numbers in mind, so turning them into rentals they barely cashflow except for my very last property i purchased that i did basically a flip on, that left lots of room between the mortgage payment and rental rates in the area. I did managed to get 1 mortgage company to offer me a loan, but they quoted me 6%+ on the loan.
So an option i have been thinking to do is just place all 5 properties up for sale, because if i can sell them all i would walk away with around 285k in positive equity based on current market vales on all of them, then 1031 exchange into something local since im not longer in the military. I feel i could greatly improve my cash flow just repurchasing new rentals local with the equity, even thinking of trying a multifamily like a 4plex.
What do you all think? I have never 1031 exchanged before, so it would be a learning experience, plus im thinking of trying out managing the properties myself locally.
Most Popular Reply
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Now is generally a pretty good time to sell. It remains a strong seller's market in most areas of the country, and most of us agree the market is close to it's peak.
Beyond that, it's hard to really offer specific advice without knowing more about your situation and your properties.
1031 exchanges are a great way to defer taxes, but they come with some hoops you'll have to jump through. Timing being one of the most challenging - you'd have to sell all five properties, and buy any replacement properties, within the time limits specified for a 1031.
Keeping 6+ deals together at the same time is a lot of plates to keep in the air, and finding properties to buy (with so little inventory and so much competition) ends up being the most challenging part for many investors.
Though there are some creative solutions to this and other issues - Fellow BP member @Dave Foster is the man to talk to about the 1031 side of things, and he has a lot of tools at his disposal to help with all of the above.
- Jeff Copeland