Need Advice on how to best use my equity.

[Jeff Shaver]

Current investment property in San Diego brings in $5K a month, my net after mortgage/PM/etc. is around $650. I have roughly $550K in equity and would like to use that equity to invests in more properties. I have tried to do a HELOC but I've recently retired from the military and haven't started another W2 therefore lenders don't want to approve the HELOC. Should I sell and 1031 the equity into a apartment complex where I can increase my net per month? Also, after I do a 1031, how long do I have to wait before I can cashout refinance? Thanks for the advice.

[Caleb Brown]

Doing a 1031 is a great idea. I would start analyzing and getting an idea deal wise what's out there. Do you plan to pay all cash with the equity or use it as a down payment? I would lean towards a down payment so you add more doors. 

[Lauren Speidel]

Hi Jeff,

Regarding the cash out refinance after an Exchange, you are going to get different opinions based on who you ask. I have sat in on other 1031 Exchange presentations where a Qualified Intermediary has said you can refinance as quickly as it "takes to make a cup of coffee" after the purchase. I would probably lean more toward a time frame of 60-90 days to season the purchase. The longer you wait, the better, even though there is no direct language in §1031 about doing a cash out refinance after the purchase. I'd chat with your CPA to see what their opinion is.

Hope this helps!

[Dave Foster]

@Jeff Shaver There is no specific statutory time frame before you can do a cash out refi after completing a 1031 exchange. It's not uncommon for clients to be working on their refi while they are completing the purchase. Refi's before a 1031 should consider some seasoning time. But after an exchange - sign the purchase documents with one pen and pick up another pen to sign the refi docs :)

Another strategy you could consider is reinvesting into multiple properties, where you purchase the first property cash (ensures some security and concentrates the equity) and the second property with a mortgage. Once you complete your exchange you could immediately do a cash out refi on the first property to access that concentrated equity you need. Investors love to take advantage of this strategy to expand their RE portfolio and have better appreciation potential.

[Dan H.]

Quote from @Jeff Shaver:

Current investment property in San Diego brings in $5K a month, my net after mortgage/PM/etc. is around $650. I have roughly $550K in equity and would like to use that equity to invests in more properties. I have tried to do a HELOC but I've recently retired from the military and haven't started another W2 therefore lenders don't want to approve the HELOC. Should I sell and 1031 the equity into a apartment complex where I can increase my net per month? Also, after I do a 1031, how long do I have to wait before I can cashout refinance? Thanks for the advice.

 You do not indicate what your current interest rate is.  I assume most of the $550k equity came via appreciation.  This is relevant for multiple reasons 1) appreciation is where the real wealth is generated in RE 2) real estate has tax advantages over cash flow 3) in CA property tax increase is capped.  Large appreciation implies property tax savings versus a new purchase. 

Have you calculated your monthly appreciation?  I have San Diego properties purchased with good timing and properties purchased with poor timing.   My worse San Diego appreciation property appreciated $2700/month (I would be shocked if yours is worse than this).  My best appreciating property has appreciated over $10k/month.   Note with the current rules, I never plan to pay taxes on the appreciation. 

My point is cash flow is only one source of return on RE and in my opinion the least desired because it gets taxed annually.   To determine the quality of a property requires to evaluate all of its return as well as potential return.  Your current RE seems like a fine asset that I would not consider selling to enter most other markets.  

Good luck

[David Krulac]

@Jeff Shaver There could be a problem with the plan.  If you can't qualify for a Heloc, maybe you will not be able to get financing for the apartment purchase. Institutional lenders will look at your non/short employement as a negative.  All is not lost, if you can find a seller of the apartments who is alos willing to finance the purchase for you;  Or look for a private/hard money lender.

[Gregory Schwartz]

Jeff I also hate seeing all that equity just sitting there but you really need to look at where else you can put that money to work that will out-earn the current investment. Make sure we're accounting for the appreciation, cost of the sale, cost of the purchase and one of my favorite factors, the risk. If all of those are taken into account and your money can do drastically better in another property then yes look into 1031. Assuming you can get the loan for the new property 

[David Krulac]

@Jeff Shaver  Check with NAVY Federal or USAA for possible financing.

[Jake Baker]

@Jeff Shaver

It's good to see a fellow San Diegan on here.

If your goal is higher monthly cash flow, transitioning to larger assets with better economies of scale (like multifamily) could make sense. Be sure to factor in management complexity, market research, and your risk tolerance as you evaluate options.

Without a W-2, HELOC approval can be tricky, but some lenders will work with retired individuals, mainly if you can document stable income (rental income, retirement funds, etc.). It's worth exploring credit unions or lenders specializing in non-W-2 borrowers.

[Tim Ryan]

Hardest part will be to find a good cash flowing multifamily right now. It's super competitive still. You don't want to be under the gun of the time frames in the 1031 without a deal.

I'd start with finding deals. And see if you're able to get it financed since you don't have a W-2 right now.

Probably will need to partner up with someone to make this all work.

[Ashish Acharya]

@Jeff Shaver You can leverage your $550K equity by selling your San Diego property through a 1031 exchange to invest in a higher-cash-flow asset, like a multifamily complex, while deferring capital gains taxes. After a 1031, waiting 6–12 months before a cash-out refinance is generally advisable to avoid scrutiny on intent. If lenders reject a HELOC due to lack of W2 income, explore DSCR loans, private lenders, or partnerships to fund new investments while retaining your current property. Alternatively, consider increasing rent or reducing expenses to boost cash flow.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

[Aaron Zimmerman]

You could sell the property at the beginning of the year and buy a property/place that property in service (and do a cost segregation study in the same year). 

I would recommend looking through in DSCR loans.

[Trevor Finn]

Hey @Jeff Shaver,

You're in a great spot with that equity! If a HELOC isn't an option due to income requirements, a 1031 exchange into an apartment complex could be a smart move to boost your monthly net cash flow and diversify your portfolio. Just ensure the new property aligns with your financial goals and cash flow expectations.

After completing a 1031 exchange, you typically don’t have to wait long to do a cash-out refinance. However, some lenders may require a seasoning period (usually 6-12 months) to ensure stability. Check with your lender on their specific requirements. With your equity and clear goals, you’re well-positioned to scale—best of luck!

[Ko Kashiwagi]

Hi Jeff,

What is your property worth and what is your current interest rate? 1031 could be a great opportunity if you can find a great deal. However, if your current interest rate is low, be aware you will be buying into a deal with much higher interest rate with today's rate.

For your new purchase, you should be able to use a DSCR loan and get financing without income as long as credit is good.

[Sean Graham]

Quote from @Jeff Shaver:

Current investment property in San Diego brings in $5K a month, my net after mortgage/PM/etc. is around $650. I have roughly $550K in equity and would like to use that equity to invests in more properties. I have tried to do a HELOC but I've recently retired from the military and haven't started another W2 therefore lenders don't want to approve the HELOC. Should I sell and 1031 the equity into a apartment complex where I can increase my net per month? Also, after I do a 1031, how long do I have to wait before I can cashout refinance? Thanks for the advice.

I haven't done a HELOC recently, but when I did, they didn't care about the W2 since I already owned the home. Not sure what it's like now though.

[Keith Mintz]

Quote from @Jeff Shaver:

Current investment property in San Diego brings in $5K a month, my net after mortgage/PM/etc. is around $650. I have roughly $550K in equity and would like to use that equity to invests in more properties. I have tried to do a HELOC but I've recently retired from the military and haven't started another W2 therefore lenders don't want to approve the HELOC. Should I sell and 1031 the equity into a apartment complex where I can increase my net per month? Also, after I do a 1031, how long do I have to wait before I can cashout refinance? Thanks for the advice.

 My first thoughts are what kind of property do you have and what kind of rental are you operating? The answer to your question depends on the opportunity you have with your property. I specialize in 1031 exchange, investments, and creative rental strategy so I can confidently and deeply analyze your situation. Feel free to send me a message!