When you talk to the local assessor be sure to ask him or her why price paid isn't always the market value and why cost expenditures don't always contribute to market value (expect maybe California).

The basic idea, is that if the expenditure restores something to its basic functionality, it is a current year deductible expense.

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

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.

Do not forget the indirect expenses and the capital expenditures.  

Real estate can offer great ROI but I don't know too many properties that cash-flow more than 17% (guessing that's your approximate credit card interest rate) after servicing the loan, cap-ex, expenditures, etc.  

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).  

Whatever utility your tenant doesn't pay, will be the utility that's used and abused with no thought to expenditure. 

I plan on reinvesting in the rental properties where needed, so my goal is to have the stated cash flows after considering the reserve I should be building for any necessary capital expenditures .