Buy and Hold or 1031 into larger building

San Jose, CA · Member since 2013 · 24 posts · 4 votes

I have some properties in an average neighborhood that i developed into large apartments some with five, six or even seven bedrooms . Some are rented by the room so the work involved is becoming too much. I am a buy and hold investor and undestand the long term benefits. I don't want to look back and say damn i wish i never sold anything.

My questions is If i sold all these properties and done a 1031 into a single building of approximately the same total value in a nicer area would that make sense? It would be far far easier to manage.

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Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

@Brendan O., the 1031 will allow you to go anywhere in the US and into any type of investment real estate. So the metrics you're probably looking for is the cross point of ease of management on on axis and income on the other access. That's going to be unique to you. Many investors at this point make their move into commercial single net or NNN properties. Others may not be as comfortable with that like @Scott E.. You like to buy and hold. But I would also spend some time thinking about sector and type not just location.

If you 1031 you won't be able to go into REITS directly. A move into a REIT requires a process called a 721 exchange. Once you have moved from the real estate into the reit you no longer own real estate. You own a security. So, many of the benefits of real estate ownership are no longer available. A high price to pay for someone with a buy and hold mindset. Certain TIC syndications and Delaware statutory trusts round out your available real estate options

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Matt K.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
4y
Quote from @Brendan O.:

I have some properties in an average neighborhood that i developed into large apartments some with five, six or even seven bedrooms . Some are rented by the room so the work involved is becoming too much. I am a buy and hold investor and undestand the long term benefits. I don't want to look back and say damn i wish i never sold anything.

My questions is If i sold all these properties and done a 1031 into a single building of approximately the same total value in a nicer area would that make sense? It would be far far easier to manage.
Have you considered going out of state? You could 1031 into some pretty good sized Midwest deals....

You could also do a combo of new properties and some REITs to balance the level of hands on effort.

I went out of state on a small 1031 deal, was intimidating at first but looking back was a good experience and has gotten easier once the right people in place.
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Scott E.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
4y
Nice work on your development project. It does sound high maintenance though especially if you're renting by the room.
My only feedback here is that you're considering selling a diversified portfolio and dumping all of the funds into a single building. Sounds easier and like less headache on paper, but what happens when that unit has vacancy? I recently had a single tenant building medical tenant bail on me just 1 year into her 5 year lease... and I was stuck with about $12k per month in overhead until we found a new tenant.
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
4y
@Brendan O., the 1031 will allow you to go anywhere in the US and into any type of investment real estate. So the metrics you're probably looking for is the cross point of ease of management on on axis and income on the other access. That's going to be unique to you. Many investors at this point make their move into commercial single net or NNN properties. Others may not be as comfortable with that like @Scott E.. You like to buy and hold. But I would also spend some time thinking about sector and type not just location.
If you 1031 you won't be able to go into REITS directly. A move into a REIT requires a process called a 721 exchange. Once you have moved from the real estate into the reit you no longer own real estate. You own a security. So, many of the benefits of real estate ownership are no longer available. A high price to pay for someone with a buy and hold mindset. Certain TIC syndications and Delaware statutory trusts round out your available real estate options
The 1031 Investor5137 Reviews
Website View Page
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Account Closed
PA · Member since 2010 · 339 posts · 168 votes
4y
You indicated that you developed your current apartments, so you must have the skill set and capacity to convert them into 1, 2 and/or 3 unit apartments. Of course, this depends totally on how the building are configured.

I am certain you have considered hiring a property manager but, from my experience, that would be a high-risk endeavor.
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Benjamin Goodman
Investor · Boston, MA · Member since 2018 · 45 posts · 31 votes
4y
Quote from @Dave Foster:

@Brendan O., the 1031 will allow you to go anywhere in the US and into any type of investment real estate. So the metrics you're probably looking for is the cross point of ease of management on on axis and income on the other access. That's going to be unique to you. Many investors at this point make their move into commercial single net or NNN properties. Others may not be as comfortable with that like @Scott E.. You like to buy and hold. But I would also spend some time thinking about sector and type not just location.
If you 1031 you won't be able to go into REITS directly. A move into a REIT requires a process called a 721 exchange. Once you have moved from the real estate into the reit you no longer own real estate. You own a security. So, many of the benefits of real estate ownership are no longer available. A high price to pay for someone with a buy and hold mindset. Certain TIC syndications and Delaware statutory trusts round out your available real estate options

Could legally 1031 into a Delaware Statutory Trust AKA DST for a similar result...
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