WHERE to 1031 Exchange? - Posted by Kevin in CA

Posted by Rich-CA on May 20, 2007 at 13:00:13:

First, the disclaimers. I was looking at OkC about 9 months ago, and we know how fast some areas went south once the sub prime lenders retrenched or disappeared. So your info may be better than mine.

I have a general rule of thumb regarding deciding where to spend my time. The closer the monthly rent gets to 1% of the purchase price per month at 20% down, the more likely I am to spend time looking at the market. As of 9 months ago, I was seeing rents in that target range for OkC.

I am working a strategy that assumes a certain equilibrium level for housing prices as they relate to household income (the exact formula I am using I developed and is proprietary). It represents the supply/demand balance in housing prices. Target markets are ones where the housing prices are below the equilibrium point (under valued) and the rents net out the holding costs (positive cash flow).

As a rule, once appreciation starts. the rents start to drop because the source of new buyers is from the “top end” of the rental market. The new equilibrium level SFH are not cash flow positive for new purchases and some borderline purchases may slip from positive to negative.

When I evaluated OkC, it was one of those markets with undervalued housing. I would suggest current research as these things are in flux at all time.

The problem I have with “getting in” on the latest fasted growing markets is that this is a game of musical chairs and you don’t want to be the one left standing when the music stops. The idea is to locate a place likely (as much as anyone can predict the future) to be a place where the music is about to start.

WHERE to 1031 Exchange? - Posted by Kevin in CA

Posted by Kevin in CA on May 19, 2007 at 18:01:11:

I’m going to be selling one of my rental properties in Austin, TX this summer, and would like to 1031 the profits (about 30k) into something that cashflows. I’m not interested in buying anything in CA, and I’m getting out of the Texas market because Texas state laws are ridiculous and they don’t allow HELOCs on loans! So you have to just sit on your equity.

I would like to get in a market that at the very least is not depreciating like California is currently doing, and where you can put down 5-10% and get a place that cashflows a couple hundred bucks a month. I’m considering Alabama and North Carolina, does anyone have any other ideas?

I’m also bearish on the U.S. economy for the next few years and selling most of my other rental properties, but want to keep at least some in the game.


You can get HELOCs in TX - Posted by matx

Posted by matx on May 20, 2007 at 14:54:55:

You can get HELOCs on rental/NOO properties in TX. Call Wells Fargo or WAMU. (You can’t get a HELOC as a second in a piggyback when you take the first out in TX.)

Re: WHERE to 1031 Exchange? - Posted by William L. Exeter

Posted by William L. Exeter on May 20, 2007 at 02:27:23:

The fastest appreciating markets are currently North and South Carolina.

Re: WHERE to 1031 Exchange? - Posted by Rich-CA

Posted by Rich-CA on May 20, 2007 at 01:15:06:

I have found that Nashville prices continue to rise while many other markets are falling. Oklahoma City likewise looks solid.

Re: WHERE to 1031 Exchange? - Posted by James Harris

Posted by James Harris on May 20, 2007 at 01:08:19:

Kevin, My name is James Harris, Have you considered Kansas City, Missouri? Email me and I will get you some more information, or call me at 660-429-3874

Re: WHERE to 1031 Exchange? - Posted by Mark (SDCA)

Posted by Mark (SDCA) on May 20, 2007 at 12:26:15:

I am surprised to hear you mention the OKC market. I have relatives in that area and have tried for years to make the market work. It seems to me that it’s just not a good market at all (in terms of appreciation OR rentals) except that it’s very cheap to get into.

I would be interested to hear what you are seeing in the OKC market.