Introducing myself + wondering how to strategize a 1031 exchange

[Patrick Gregory]

Hi everyone,

Trying to spend a few minutes each day on here to learn as much as I can. 

I live in northern VA, have been househacking for five years and also have a paid-off condo about two hours away that hasn't appreciated beyond inflation since I bought it 14 years ago.

I recently signed a tenant for another year in the condo. Being a landlord for 12 years has been fine, but the COA fees etc. mean it isn't giving me a great ROI.

So once that lease ends next year, I'm planning to do a 1031 and exchange the condo (worth about $250k) for out of state (or at least out of area) multifamily or SFH to rent out. Still learning about markets so haven't narrowed down where yet. So far I've looked a bit at Alabama, Columbus, Indy, Norfolk, Memphis, Detroit.

Wondering what my 1031 strategy should or could be - one thought is to pay cash for a couple of properties, and later get loans on them to finance more purchases. 

But I'm more interested in making connections with people here and continuing to learn over the next year!

[Dave Foster]

@Patrick Gregory, One thing that isn't talked about much is the impact that depreciable basis can have positively on your tax return.  If you've been renting that condo out for a while you've seen how it reduces your taxes.  The 1031 exchange is ideal for increasing your depreciable basis because it lets you use the proceeds as down payments on larger properties or multiple smaller properties that total more.  Every dollar you buy more than $250K is another dollar you get to depreciate on your taxes.

And it's another dollar of loan that is amortized by the tenant. So even though it is more difficult to find lucrative cash flow ROI these days, the 1031 lets's you upgrade into a much higher blended IRR return. You just have to be patient to get the benefit of some of that return. Which sounds just like the type of investor you've been.