1031 from a prestigious home to a quadruplex in a lesser area?

[Wesley Hu]

Hi All,

I am currently looking to trade a single family home in a prestigious and HIGHLY demanded area into a multi-family, as the rental income on this property is low compared to how much it's valued at. The multifamily location would obviously have to be in a less desirable area, but I would like to know if this decision would be a correct one. Although the rental income would supposedly double, triple, or possibly quadruple, I have no experience with quadplexes that are under rent control.

Does anyone have experience with situations like this?

Thank you all!

[Frank Geiger]

When you invest in single-family homes in nice areas you’re banking on appreciation. So by holding onto that property you’re assuming the value will increase more over time. My strategy is cash flow. I would not invest in a bad area just for cash flow because you’ll likely loose that cash in more operating expenses. 

Maybe there is a B/C+ area around you to invest in. That would raise your cash flow but not force you into the D area.