max out HELOC buying other properties then sell property

[Kevin Macdonald]

I am almost finished rehabbing a property. The property is a very nice house I will have tons of equity but due to high tax area I really won’t be making anything on rent. The rental income will basically pay for upkeep/mortgage payment and taxes. All I will be doing is gaining equity at this point on the property.

I am thinking of possibly selling the property and buying multiple lower end rentals where I could actually be making profits each month on rent. My problem is I plan on only buying the rentals I find at auctions, deals and not right off the MLS that I would do minor rehabbing then rent out. If I read the rules right on a 1031 exchange I need to have the money re invested in 45 days from sale of property number one is this correct? I would have had the property for well over a year at this point.

I was thinking as a strategy what if I got a HELOC on the number one property, keep using the HELOC to buy multiple lower end rentals (20% down on each one), then sell the number one property and do a 1031 exchange with the remaining profit from the sale.

If I just sell the number one property then I have to pay taxes on the profit right? I am just thinking of other options. If I use all the equity by buying multiple other properties then sell how do the taxes work on something like this do I have to somehow show that I used the equity and still pay taxes on that as money made?
I know i need to talk with an accountant, and by no means do I want to do anything illegal but just wanted some opions first.

I am new to this and just thinking of all my options.