1031E into Value-add out of state Apartment (ADVICE?)

[Neno D.]

Hello All,

New to the posting on BP, not new to the forms. Quick summary, my wife and I have made a financial goal to eventually migrate away from the 9-5 grind and have financial freedom through our passive RE. We have a sizable rental portfolio of single family/condo properties in California with significant equity we are planning to 1031E into multi-family properties over the next 3 years (vivid vision)

Looking for some general guidance or stories of how to make it happen, remote. Lots of stories about people investing in their backyard, but sunny SoCal is not the place for us due to CAP rates, etc, etc. We are targeting Nor Cal / Oregon / Nevada / Texas...

How do you, realistically, successfully buy and rehab value-add multi-family properties out of state? I realize we can hire a property manager, hire people to do repairs, etc...but it seems like that defeats the purpose of a value add, as you are likely going to over-pay for these types of activities without having deep knowledge or connections in the market? We are doing the right things, reaching out to brokers, calling, evaluating 5 - 10 deals a day (good or bad), learning all of the terms, etc etc...Just struggling with the actuality of buying a value-add property that needs decent work, rent increases, "overwatch" if you will, etc.

Any insight, stories or guidance would be extremely appreciated. Hope to hear from some of you folks! Thanks 

[Jason Shackleton]

@Neno D. Congrats on your decision to leave your job and become financially free. I will add a few thoughts. I would do the 1031 exchange or a portfolio loan refi prior to leaving your jobs and also buy the bulk of your new multi family portfolio while working for the best rates. Also you and your wife will have a lot of time on your hands when you make this move to leave your jobs. I would use that extra time to do lots of the work yourself in a value add multi family purchase. Last point I would not deploy all of your money into the deal and tie it all up. Perhaps take the tax hit on one property sale and take that money off the table to live off. Having 2 people liveing off of cash flow from a portfolio is very possible but it would be nice to have some extra funds set aside to either do a few smaller deals or earmark for other non real estate related activities.

Good Luck!