Since 1031 is tax deferral, I assume the gain is calculated with the likely substantially lower basis from the pre 1031 property acquisition + additional cost over the years.And yes, recapture all depreciation ( on both prop before and after 1031) make sense.

A good example of this might show high return for a house in Detroit that is 100 years old, next to a GM plant, vs lower return for a 10 year old house next to the Tesla plant in Taylor, TX.   

this will just set you back.i don't know what time you have available to dedicate to RE - if you are able, you could try to build a team and explore a market within a couple hours of you with a lower price point. 

Over the whole year we have had higher listings than the previous year (the last several years have had lower and lower inventory each year).

I do suggest putting the asset in the app ASAP to lower the audit risk.You can meet Substantially all participation tests (test no 2).

Hello  @Thomas Sheehan,If your goal is to invest in an apartment where you don't have to concern yourself with maintenance and cap Ex, this deal (or perhaps another with similar rents and lower price) could make sense.The downside to deals like this is that your rents could eventually hit a ceiling as newer apartments (some with more amenities) become available.

However, as you mentioned, the lender is referring to Fannie Mae guidelines that say PMI can't be removed until after a two-year seasoning period, even if the renovations themselves have lowered the LTV.Fannie Mae's Policy on PMI Removal: Generally, Fannie Mae guidelines allow for PMI removal if the LTV drops to 80% or below and the homeowner requests it after the loan has seasoned (usually 2 years).

I had to do an elaborate french drain system with multiple pumps as the lower level units would get water with hard rains. 

And you'll likely want to consider more fringe & cheaper areas for lower prices & better cash flow.I bought a 3-unit building in November last year when rates were 8% using a renovation loan (5% down), made cosmetic renovations to the units, and then we got way stronger rents than expected.

One thing I did note is my insurance is $3K a year lower due to the monitored fire suppression system in these larger properties versus my smaller properties that sleep 12 or less built close to the same time.As someone who has lived in Illinois twice, the politicians there don't care if people burn as long as they can tax and spend.