Advice needed...1031 exchange or HELOC options

[Daniel Easley]

Hi Biggerpockets family,

I am in search for advice on entering into multifamily investing. My goals are buy and hold longterm focusing on cash flow. I’ll be inheriting a property free and clear, and wanting to move back down to the San Diego area. 

My thoughts are to never sell real estate, and keep the cash flowing rental of the free and clear property while taking a Heloc out of it as a down payment for a small cashflowing multifamily deal. The second option I wanted advice on was whether or not to do a 1031 exchange of our inherited property into a larger asset in SD.  

I really appreciate your time in sharing your wisdom!

[Jaysen Medhurst]

@Daniel Easley, what are the details on the inherited property? Value, rent, etc.? If it's a SFH in SoCa, it's unlikely to be a good rental. The market is just so crazy that you can't get enough rent vs. what the place is worth.

Talk to your accountant about the inheritance as well. Upon death a property gets a step up in basis, meaning if it's worth $500k, the government considers that the new base line. You sell for $500k and it's as if you made $0 profit. Again, talk this through with your accountant, the ins and outs of tax law are many.

All this being said, is SD the best place to invest? I don't know. It's very expensive and will be difficult to cash flow. It's probably worth considering out-of-state investing where your money can go further.