1031 Exchange: Feedback Requested

[Gaemer Gutierrez]

Excited that this is my first post....I have 3 properties in the Providence, RI area. I am doing a 1031 exchange using my apartment in New York City. I plan to invest back in the Providence area. I have to replace $1.3 million. As you all are aware, prices are high and inventory is tight. Our plan is to put 50% down on 3 - 3Family homes. I am finding even with 50% down payment, I am only seeing total $500-$700 cash flow per month. 4%-7% Cap and 3%-5% COC. Not the best but I want to avoid the taxes. I want to stay in my area. How would you approach this strategy? Is my strategy workable? Is there something I am not thinking of?

[Dave Foster]

Thanks for the shout out @Taylor L..  @Chas Gunkel, I hope you have a QI in place or that your property is under contract but hasn't closed yet.  Because if you closed without a qualified intermediary in place to administrate the 1031 you cannot go forward with the 1031.  The QI has to be in place prior to the closing of the sale.

@Gaemer Gutierrez, The 1031 can be as flexible as you allow it in order to find good returns on good properties.  With the 1031 you can buy any type of investment real estate any where in the US (and even a couple of territories).  But when you start to put limiting parameters you kind of get stuck with what's avaiable and in what type.

The investing area you're talking about (staying close in the NE and in the urban areas) is and always has been more of an appreciation area.  So it's not too surprising that cash flow is tighter.  But appreciation should be better over time.

If you're chasing a particular return you may have to look at different geographies and different sectors.  But if you want a certain geography you may have to settle for a little less return unless you change sectors.  It's all a great game of tradeoff..

It is kind of counter intuitive but have you proformad putting less down and buying more property. Higher leverage usually equals a higher ROI. And in this era of almost free money, the added bonus you get on your IRR is very quick capital rebuild from the amortization of the loan paid by the tenant.