1031 Exchange / Multi- Family / 375k to Invest

[Jacques Bailey]

Bigger Pockets Family-

Need a little help, better yet expertise. I currently have a Residential Investment Home that is currently on the market. After selling, I should walk away with about 375k to invest into another property. (Ideally Multi-Family) I struggled to find a bank to do a HELOC loan therefore had no other option but to sell :-(

I having a hard time finding the right opportunity (and Area) to focus in. I currently have strong ties to Phoenix, Miami, DC, Memphis and Houston so ideally would like to invest in Multi-Family in one of these areas. My previous property was cash flowing about $1675 a month or $20K a year.

My focus is to invest in the most amount of doors possible, in a Class B Neighborhood netting more than my previous investment. Looking for CoC greater than 12%.

I would like to make more than 20k a year off the investment, in market that has decent appreciation so that I can refi in a year or 2.

Where would invest? What strategies would you deploy? Who do I need to connect with for assistance.

THANK YOU IN ADVANCE! (banging my head against the wall- LOL)

[Dave Foster]

@Jacques Bailey, This is indeed a transitional time in the market.  Many properties and classes of properties that investors prefer are still not penciling out with the impact of higher borrowing costs.  And many sellers are not interested yet in discounting to numbers that do work.

One thing you could do as your search becomes more urgent and you get a contract to sell would be to also look at the minimum purchase price you can make and still satisfy the 1031 exchange.  I know your goal is to get as many doors as possible.  But there might be some merit in getting the fewest you can right now.  The reason is that this will leave you with the greatest equity in your replacement property.  And equity equals borrowing power at a future date.  You will then be free of the 1031 timelines and can wait for the market to come down to what you want it to be.  Then you simply access your equity when you want.  And you'll end up with maybe more properties because you're buying them right instead of forcing the issue now just to satisfy the 1031.

Along with that option is one that several of our clients have done to mitigate risk.  Use your proceeds and buy two properties.  One with cash and one with maximum debt.  This also ensures that you meet the 1031 guidelines but have a debt free property free also of risk in a market down turn.  Yet with tons of equity available when you want to buy something else.