But more importantly the bright line test appears to be the "intent' of the tax payer.If your intent was primarily to resell (most interpret that as a forced appreciation/value add/low ball purchase scenario where the desired equity is present at the time of purchase) then you are treating the property as inventory and 1031 is not appropriate.If your intent was to hold to use or to generate income from, or to take advantage of longer term appreciation then you are treating it as an investment and 1031 is appropriate. 

@Adeel Makda congratulations on passing your test!

Stress testing your expenses in a worst case scenario where you need to replace a large ticket item down the line is a safer way to ensure that the property will always cash flow.Also the only thing catching my eye is the ARV stays at the purchase price even after putting in $5,000 for rehab.

I am looking to pick from 3 or 4 mid sized markets in order to test the waters. 

If he wants to test the process, tell him he can find himself with a judgement for rents due real quick.

Brent, my-worth-what-you-pay-for-it tactical advice would likely be similar to Thomas S. actually :  stress test the various loans under different interest rate scenarios since we have a rising rate environment.

I'm assessing a HUD property (my first investment prop) and am trying narrow my estimate on the cost of rehab on a house.I was able to pull up a PCR on the property (a brick ranch) and here are some key things:Cooling/AC - DamagedHeating/Furnace - DamagedHVAC Duct - DamagedPlumbing: - Sink: Damaged - Pressure Test: FailThe property is a 1,500 sq ft ranch home that seems like a good opportunity provided I don't overshoot the cost of these items.

Classes are a few hundred dollars, you pass those, and then take the state test.

Debt Service on the property $241,395 @ 25% ($60,348) down is $181,047 or $906/month.Cash Flow = $2,875 - $191.67 - $733.33 - $220 - $201.25 - $201.25 - $143.75 - $906 = $277.75/month...on 5 units...Because I focus on cash flow, this property doesn't initially pass my napkin test but if its under market rents, it might be worth digging into more.

I will be testing for my real estate license this month and cannot wait to get started in my career.