Currently I am only allowed to add $5500 per year.3 If I sell the property to upgrade, would I have to do a 1031 exchange even though it is already in a tax deferred account?

Hello fellow BP junkies, I have placed an offer on a 5 unit, hoping my #s are correct and a suitable investment.there are (3) 1 bdrm  & (2) 2 bdrmOffer/Purchase price=565k, cash out= 141k, financing =424kCURRENT SITUATION...Note: in the 1771 expense , 971 is taxes, ins, water, utilities (mandatory/immediate expenses)                                                 800 is for future repairs, vacancy, property upkeep,gross, 4,748 - 1771 (expenses) -  2147 (debt) = 830    This comes out to a 7 % cash on cash return, with a cash flow of $166/door* I plan on upgrading the 2 - 2 bdrm to bring them up to market pricekeep in mind … 1 bdrm go for 1000-1100 ….. 2 bdrm go for 1300-1500the 2 bdrm are the laggers.PROPOSED SITUATIONwith the upgrades to the (2)  2bdrm  units & $50 increase in the (3) 1 bdrm  units …..

@Pat Jackson Things are going to be taken or broken during a guest stay- that's the nature of the business. 

My last deal I did I went way overboard with plumbing the whole house...I went to see a house today that (NW Houston near Tomball and Spring) was built in 2005 and has never had any upgrades. 

If something is broken, it’s your job to fix it.

The house was in decent shape, but I got a renovation loan to upgrade the house. 

My primary residence is covered under our homeowners policy but we opted for the extra coverage through Dominion (or whatever they are now) for the upgraded sidewalk and landscaping replacement coverage should we ever have to dig. 

While I don’t like to be the first investor to upgrade a neighborhood, it’s nice to get in at about the 25% level on the way up.

We invested (150 Thousand in the build) of our own money, not including upgraded flooring, and window covers, which the contractor did not include. 

We typically get a premium to the market, which is disproportionate to the cost we incur with the materials & labor associated with the upgrades.