Types and States for a new investor from Residential to CRE
Hi, 

1031 into 300k and seeking education on commercial real estate route. 

General questions: What asset class (if any) are the better cash flows for type B &amp; C properties that would be out of state?

Any one find one state more favorable for over another for taxes?
[{"id": "i45phfo", "text": "Why out of state? With under 1MM loan you'll probably be working with community banks wanting you and the property to be local.", "replies": [{"id": "i463mcy", "text": "I think I mistyped. I have residential property that will net 300k. I was going to roll that as a down payment into the CRE space.", "replies": [{"id": "i467gxa", "text": "Right, you laid it out correctly. 300k would get you a million dollar property 25% down with some cash reserves. 750k loan will not get you into the major nationwide banks.", "replies": [{"id": "i4j4neh", "text": "Turns out we can utilize a SBA 7a loan up to 5mil. This opens up more possibilities locally. \n\nLooking on loopnet we could potentially pick up something locally and I could learn on the go. Nothing we want to do at the moment. It's nice to know the option is there.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i462orr", "text": "I would take the tax hit and do a syndication or invest as an LP (if you don\u2019t know what this is stick to Resi for a bit longer). You may can find a decent 4-6 unit retail center for a million and put the 300k down", "replies": [{"id": "i463vun", "text": "Thank you. Truly. \n\nAny suggestion on where to start learning about CRE?", "replies": [{"id": "i464gux", "text": "Was in your same shoes about a year ago. Have a fix n flip company in a few SE states. Using those same cities to prospect CRE. I liked the retail centers so I just would learn based off of that niche. Did a successful syndication with 60k of my own and 3 other investors who brought the majority but the deal ended up falling through due to phase 1 contamination which I learned a lot just by doing it. I still have about 100k and will look to do another in the next 3-6 months once I find a deal. If you\u2019re ever interested in seeing what I come across feel free to PM me directly and we can set up a call!", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i46liij", "text": "I\u2019m in your exact situation.  I currently have purchase contract for a 22 SFH portfolio.  What I ran into was this.\n\n1.  I found a number of deals that I was able to afford with my 1031 exchange(mine was 315k).  The problem was they always wanted more money then what their cap rate justified.  Example,  I found a 12 unit complex,  the guy wanted 1.1 million, but his net income showed his property was worth 700k.  He wasn\u2019t really willing to come down to the price based upon net income and cap rate. \n\n2. A lot of the deals I found really focused around buying SFH portfolios.  There actually is a commercial loan that gives you a 30 year\nAm, 10 year balloon with 30% down, 5.26%, interest only payments. I know this, because this is exactly the deal that I got recently. \n\nAnyway the point I\u2019m trying to make is as long as the Cap rate and net income line up and you can show a proper debt to service ratio you\u2019ll be ok.  It took me a bit to find it, but eventually I did.  It especially is useful if you come to investors with real life issues, and you explain the reasoning behind your price.  I always explain things in terms of what loan I can likely get, and I work backwards from there to get a realistic price.", "replies": [{"id": "i46vav7", "text": "Very helpful thank you.", "replies": [], "depth": 2}, {"id": "i4j3yra", "text": "I did some research. Turns we are eligible for a SBA 7a loan. The max is up to 5mil. \n\nThat opens up a lot more opportunities locally that we're not there before. \n\nMy mind jump to shopping mall but, my head says multi family.", "replies": [{"id": "i4jkm3l", "text": "I would go talk to a lender and get a commitment from them.  Things might have changed, but my understanding with those loans is they are for people operating a business that need real estate.  For example, you own a subway, and you want to purchase the building that your subway is in.   They aren\u2019t for real estate investment, buying a shopping small for example.  Again it\u2019s been a while sense I researched it, but I would go talk to lenders about this.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i46rk3s", "text": "Try to 1031 as a tenant-in-common with a syndicator or invest in an OZ person. 300k isn\u2019t much for commercial RE. \n\nThat being said, it is possible to find deals like that. Buying a 22 unit for ~1.2m including renovation costs", "replies": [{"id": "i46vdgv", "text": "Okay thanks!", "replies": [], "depth": 2}], "depth": 1}, {"id": "i47axq9", "text": "To others' points, trying to TIC into a syndication may not be worth it for for the syndication side. $300k is just too small to have some of the fuss of a 3rd party fractional owner with equal decionmaking rights. We have a $2m minimum for 1031 funds and we want them to be well capitalized beyond that for value-add deals so they can match Capex contributions.\n\nIf you do find a small syndication to work with you can negotiate out the acquisition and other fees or defer them for your portion on sale. TIC agreements can be very flexible.\n\nIf you can find another small partner with 1031 funds to JV with that could be better. Just know your partner. \n\nYou can't direct 1031 into a REIT but you can into a DST. Or do an UpREIT (721 exchange) converting some of your DST interests into REIT shares. However there are DSTs for just about all asset classes so going through all that may not be worth it.\n\nIf you are intent on owning your own property again, I'd be looking at STNL QSRs and perhaps clip coupons without renovation or refinance risk in this environment. More than likely we'll have a recession in a year or two and for people it might be a good idea to have long term stability. I write this not knowing what your appetite for risk is currently.\n\nOtherwise, take your tax hit and choose your next play without burden.", "replies": [{"id": "i47o1m8", "text": "Thanks for the info. It has helped us! It's starting to become more clear that our aspirations may be set a little to high.", "replies": [{"id": "i47ofc0", "text": "All good..it's fantastic that you are in this position and doing a 1031, if it works is a generational wealth builder. We are in the process of a bigger trade up and having contemplate/navigate all the same issues. Good luck!", "replies": [{"id": "i4j4os5", "text": "Turns out we can utilize a SBA 7a loan up to 5mil. This opens up more possibilities locally. \n\nLooking on loopnet we could potentially pick up something locally and I could learn on the go. Nothing we want to do at the moment. It's nice to know the option is there.", "replies": [{"id": "i4j4xih", "text": "Brilliant \ud83d\udc4f\ud83c\udffd", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]