Investing outside of Oahu

[R Bucka]

Aloha,

Soo much great content and professionalism here! Thank you in advance for giving me a chance. Here it goes, I’m new to the site and I’m new to investing. I have a condo in Mililani Oahu and looking to 1031 exchange it or pull equity to purchase more condos . It’s been a good rental netting me $1100/mo. Im looking for more passive income and I’m more of a long longterm investor. Hawaii is an expensive market and I’m not seeing the real estate prices that will allow me to acquire more property with passive income. I’m wondering if anyone is investing out of state and if so which areas/towns?

Background info:

Condo Value-$300K

Goal: $5000 month passive

Timeline: forever

Aloha!

[Dave Foster]

@R Bucka, let's use those numbers above - Forget depreciation for a minute (although it's the 800lb gorilla).   In CA, on a gain of $300K without a 1031 you're looking at around 1/3rd of that being paid in tax.  

I don't know why that guy doesn't think $100K of taxes is significant.  But it would be to me.  Because your 1031 allows you to use that to purchase real estate for yourself.  And what can you buy for $100K??? Maybe three cash flow properties in flyover states using it as a down payment!!  Question to ask is would you pay $850 for the opportunity to win $100K?  

Point is the 1031 is a great tool to move that portfolio into better cash flow.  And that's exactly what we've been doing for a lot of HI clients.  Appreciation has been great.  Now it's time to look at cash flow.

@Paul Welden, your concerns about the timelines are valid.  But there are many ways to mitigate that.  And every year we do an informal internal survey of exchanges that fail.  Even in 2020 it was well less than 10%.  And that's counting several that were designed to fail so the exchanger could recognized the gain in a later year.  So the situation isn't as dire as one would think.  But your point would be that some one should never purchase a bad property just to complete an exchange. And that's exactly right  The cost to start one is so negligible that it shouldn't wed you to the process in the least.  

Paying less than $1000 to spin a wheel with a 90% chance of winning $100K isn't a bad deal when just paying the tax if you fail is your worst case scenario.  No one ever went broke just paying tax on profit.