@Account Closed
Welcome to BP! I like where your brain is going, however let me give you a few tips/tricks with BRRRR and 1031.
First, in order to do a traditional 1031, you need to sell the property you have and invest in something that is a higher value than the one you sold. For example, you sell your property for 200k, then you must buy something that is more than 200k in value.
HOWEVER!! There are some very cool strategies you can deploy with a 1031 if you have the resources, skill set and the correct 1031 exchange company you are working with.
You can take the 1031 proceeds and invest in multiple properties, that combined total equates to more than the property you sold. Or, YOU can also buy a property of lessor value then the property you sold, use the proceeds to fix up the property, and so long as the appraised value is more than the property you sold after you are done with the repairs (and you do this all within 6months of selling previous property), then you can do this as a 1031 too.
Here is a example of a 1031 I just completed with a BRRRR i bought at the end of 2016:
1) November of 2016 I purchased home for 90k, put 40k rehab into it, refinanced for $135k. Rented out and cashflowed $350 a month for last couple of years.
2) Just sold property for $275k. 1031 proceeds are $120k to move to new property.
3) Purchased a property for $165k with the proceeds. THIS IS VERY IMPORTANT TO THE STRATEGY: The 1031 exchange company MUST TAKE TITLE OF THE NEW PROPERTY AND HAVE CONTROL OF ALL FUNDS. I used a private lender (you can use hardmoney) that was ok with the 1031 exchange company taking title and not me. All funds are controlled by the 1031 company. I pay a higher fee for this.
4) I am rehabbing the property with $75k and remaining proceeds went into the purchase.
5) After Repair Value is $360k for this property when i am finished. I will appraise the property with a traditional/portfolio lender and during the refinance, the 1031 exchange company will transfer title over to me.
6) So long as ALL of this is completed within 6months of selling the previous property, INCLUDING the refinance and transfer of title, then this is a complete 1031 exchange and meets all of the rules. Should this all work out on this one, I will owe about $125k on a $360k valued property and have no money into it (other than 1031 proceeds). It increases my equity by almost 90k and will cashflow $800/m instead of the $350 from previous house.
This is an AMAZING strategy with 1031 and BRRRR, and something that I am in love with. Takes things to another level. I AM NOT A TAX PROFESSIONAL OR ATTORNEY, this is just my experience and you must seek your own advice and counsel from professionals.
Your idea to 1031 into another property with all cash from the sale of a previous property with a 1031 is near impossible since you have to buy a higher valued property, even with the strategy i listed. You will almost always need a lender or additional cash when you roll up into another property. This is ok, its what leverage is for.
