@Randall King If you find the property isn't performing well, a 1031 exchange would defer the tax and concentrate that equity into something that has a greater cash flow potential, like what @Corby Goade said.

They've never navigated a period like we are in now and they haven't pivoted from their boom times playbook.If you manage to get your principal back you'll have to pay back the taxes you've deferred (depreciation recapture).

Quote from @Ian Ippolito: Quote from @Michael Plaks: Quote from @Ian Ippolito: Quote from @Rud Sev: 3) Unless you're doing a 1031 exchange  at the end or similar tax structure to defer taxes, you will have to *pay back* all that depreciation benefit at the end (on sale...which for you is in 5 years)  via depreciation recapture.

However, I would miss out on the benefits of 1031 (deferring taxes and having more capital to invest).

Ensure you work with a team that is familiar with them (accountants / lawyers).A 1031 exchange is a way for real estate investors to defer paying taxes on the sale of investment property.

@Jeff Shaver You can leverage your $550K equity by selling your San Diego property through a 1031 exchange to invest in a higher-cash-flow asset, like a multifamily complex, while deferring capital gains taxes.

In our experience/opinion (factoring in security deposit to defer some of the losses):Class A - 0%Class B - 5%Class C - 10%Class D - good luckHope this all helps!

Does this change in accounting to distributions pose any risks to us apart from a deferred tax bill later? 

If you have deferred maintenance this will be future headache and a phone call from a PM company. 

It had some deferred maintenance and I put a new roof on and fixed a few things.