1031 $500k. Ideas?? - Posted by LJ

Posted by dealmaker on October 20, 2005 at 15:33:14:

Here’s a combination of what a friend from the Bay Area and I both did. He did an apartment building into 16 or 17 houses in TX. He manages them all and after a few years sold a couple to get some cash. He seller financed which got him out of cap gains and into ordinary income (although now cap rate is 15%, so he wouldn’t do it that way now), and it got him completely out of CA.

I 1031d a CA property into 3 TX properties, one my “designated” retirement home which I rented for two years before moving into, the other two were bought for immediate flips and I paid nothing to CA on any of it and got good interest on the seller financing.

My 5 year holding period is almost up so I can move out of here if I want to. The only downside is that the ppty I sold went up another $250K in the next two years while the 3 TX ppties COMBINED went up about $20K, and I didn’t benefit from most of that.


1031 $500k. Ideas?? - Posted by LJ

Posted by LJ on October 01, 2005 at 01:56:56:

I opened escrow on 2 properties I’m selling that was cash flowing about $1500per mo.each. Total sale for both will be $1.1mil. What’s a good strategy for exchanging the funds into a property? Properties in Los Angeles are outrageous, so how can I get positive cash flow that I was relying on? Or buy a property then do a HELOC or cash out refi (which I was quoted would be a higher interest rate because it was a non-owner and wanted no prepayment penalty)? Or do I cancel escrow all together and continue receiving the cash flow and equity from these props?

Hope it makes sense.


A few thoughts… - Posted by Michael Morrongiello

Posted by Michael Morrongiello on October 01, 2005 at 11:48:33:

You will have to get out of the LA area and look into the central valley of the Golden State or OUT of state to find other properties where the focus in the cash flow not the appreciation game.


You can also look at simply paying the capital gains tax and then earmarking these funds into funding mortgages, or discount mortgages which will be able to produce some decent yields (in the 8% to 12% range).


You might investigate exchanging into some of these TIC’s tenannt in commoms interests that have become so popular. The sponsor takes your funds in and you become part owner with the TIC interest in an income producing property. One such firm we know that deals in Marina’s and their expansion is paying about a 7.5% cash on cash return + plus the potential for some appreication from the properties value. $500K can produce around $3,000.00 + month in cash flow + have some pro forma projections for future growth in the properties.

Best to your success,
Michael Morrongiello
Author of the Unity of Real Estate & “paper” study course