It is important to note that the 180 calendar day exchange period includes the 45 day identification period.You then identify the property to be acquired within the 45 day ID period, the Qualified Intermediary will set-up a limited liability company (LLC) to be used to acquire and hold legal title to the property when you close on the purchase, and then you have the remainder of the 180 day exchange period to spend the rest of the 1031 Exchange funds that are being held by the Qualified Intermediary and to ensure that the improvements related to those expenditures are completed before the end of the 180 day exchange period.Improvements that have been paid for but not completed by the end of the 180 day exchange period are not considered to be real estate at the end of your exchange period and do not qualify as qualified use property.It is not an all or nothing proposition.

So, I feel I would perhaps have enough to cover capital expenditures during that first year.

And the 2% rule is just an ideal guideline.Don't forget to include capital expenditures and debt service in your expense analysis.

Also the proformas that they will show you are usually too optimistic, leaving out lines like capital expenditures, anticipating too high of appreciation, too low of vacancy, etc.So do your due diligence and visit the operation or you are making a big mistake.  

Throw in a percentage for vacancy (I like 8%) and Make sure to account for CapEx (Capital Expenditures like a new roof, furnace, AC, etc).  

It’s not a huge expenditure for you, and will make their day.

With a conservative net cash flow of $59,000 and conservative improvement expenditure of $100,000 I think our cap should be at $450,000.

You're $9.00 upside down each and every month outside of expenditures.

In general if something doesn't meet the 1% rule I am not even going to look at it because to truly cash flow after repairs and capital expenditures I need to be hitting something more like the 1.5% rule.

Although I currently do not have the numbers to back this up, I have a good feeling from word of mouth and living around the area.I would like to raise capital doing residential and eventually move on to some commercial expenditures.