Advice on a Strategy for Investing for Passive Income

[Glenn Clovis]

My wife and I are closing out the sale of our rental unit in Portland, OR this week.  Using a 1031 exchange we are wanting into investing out of state, preferably in Texas and/or North Carolina.  We have travelled to Texas twice  in the past 6 months to look around and my wife is flying out to Charlotte/Raleigh next week to check out neighborhoods there.  Our primary goal is to establish a decent 'passive' income from the long term rental of whatever units we purchase.  We are shying away from short-term rentals, due to the inconsistent cash flow month to month. We are in our mid-50's and would rather not carry any more debt by assuming new mortgages, unless it is necessary.  My question is in regards to what the best strategy may be to capitalize on the wealth we are investing.  We are looking at approximately $525k (cash) that we need to spend.

[Jim Pfeifer]

Have you thought about passively investing in real estate syndications?  As you probably know as a current active investor, when you 1031 into new properties, you will still be an active investor.  If that's what you want - great!  But if you are interested in becoming more passive, you might consider a "Lazy 1031" strategy where you invest the proceeds from your sale of active property into real estate syndications and use cost segregation and bonus depreciation to offset the taxes.  Much less restrictive than a 1031 Exchange.  I am not a tax advisor, but I did use this strategy to sell 38 active doors that had quite a bit of appreciation so I have large capital gains and I did not pay taxes on those gains.  If you are committed to remaining an active investor - go for it!  But, if you want to have someone else manage the asset for you and still get great returns, you might want to consider syndication investing.

Good Luck!