I will be doing a 1031 exchange on our rental property to increase our monthly cash flow.

@Victor LebegueI like the first part of that agreement (being a handyman in exchange for some equity or profit sharing)I haven't heard as many arrangements for the second part (lending your credit to get 30 year notes) I'd recommend running that tactic by legal counsel to make sure you're not legally obligated if things went bad on specific properties or the company as a whole.

Jeremy Clarke my understanding is that you still have to pay the recapture tax even if you did not depreciate unless you 1031 exchange.

A prohibited transaction is a transaction between an IRA and a disqualified person that is prohibited by law.The transaction that you are describing would run afoul with some or all of the following prohibited transaction rules:Prohibited transactions generally include the following transactions:a transfer of plan income or assets to, or use of them by or for the benefit of, a disqualified person;any act of a fiduciary by which plan income or assets are used for his or her own interest;the receipt of consideration by a fiduciary for his or her own account from any party dealing with the plan in a transaction that involves plan income or assets;the sale, exchange, or lease of property between a plan and a disqualified person;lending money or extending credit between a plan and a disqualified person; andfurnishing goods, services, or facilities between a plan and a disqualified person.

But, in short the answer is you'll need more equity to get to your passive cash flow number. to get more equity in property quickly (vs waiting 20 to 30 years) you'll need to learn to create, deliver, exchange something for value. 

The other side is an investment property and you will pay tax on the gain associated with it unless you do a 1031 exchange and defer the tax by using the process and buying another investment property.You can always move out of the one side and use the entire property as investment for a year or so and then sell and 1031 the entire thing.But The really powerful thing is that if you hang on to that property and continue to live there until you qualify for the primary residence exemption you can then sell and take half of the gain tax free and defer the tax on the remaining gain with a 1031.

I don't know how much a basic water heater or dishwasher costs today but the deductible plus a few months' premium would probably cover either.The only repair they ever covered (not quite) was a cracked heat exchanger in a gas furnace.

Just looked back at some of the PMs we had exchanged wow.....five years ago!

Do you plan to pay your portion of the capital gains tax when the property is sold or will you make an exchange?

After 10 years, then they can call those loans.Our first option is to 1031 exchange after the 5th year or close to it.