$55K in 1031 - DST vs. Turnkey | Analysis & Discussion

[Andrey Y.]

Lets start with a backstory.

Around early 2014, I purchased my first property immediately intended for an investment in Oahu, Hawaii. I put down $50K and got a 0% loan from a family member for $100K (paid around $150K cash).

I immediately did my first cash out refi at an appraised value around $185K. This gave me around $135K cash out which enabled me to re-coup most of my DP and loan amount. This property always cash flowed at >$500 per month after PITI, and condo fees around $400. Additional maintenance was minimal at 2-3% of gross rents.

I did my 2nd cash out refi around early 2019 at an appraised value of of ~$290K. Mortgage balance at this point was around $113K, which gave about $80K in tax free cash out. Property still "cash flowed" and life was good.

[Brian Burke]

@Andrey Y., congrats on the successful investment. I'm staring down the same hole--I have a couple of houses that I bought in the early 2000s and refinanced not long before the 2005 market peak. Got way more out of them than I had into them, then had to suffer through negative equity for about 6 or 7 years. Now I can sell them but with depreciation and the refinances I'll net just enough to pay my taxes. So I have essentially two choices--hold them for another ten years and let the debt amortize down more, or sell them and add outside cash to a 1031 to buy something else. But what else? Beats me...now that I buy mostly 150+ unit buildings, buying houses in my personal portfolio is about as exciting as a prostate exam. One thing is for sure, I have no plans to buy a DST nor a TK, so I guess that leaves me with option 2, sell, add some cash, and buy a 10-unit or something. I'm just not anxious to endure the exercise.

I wish I could guide you on what to do here--seems like Door #1 and Door #2 is a choice between two not-so-great alternatives.  Maybe Door #3 for you is to 1031 into a 4-plex or some other small income property and hire a property management company??