What to do with 25 year-old multi families,

Question

I am a 40 year veteran contractor and have accumulated three multi families in a single-family over the years, they are all paid off and do pretty good on Rent. I’m trying to decide/determine what to do with them because I don’t want to work them anymore, sell them and pay cap gain, 1031 into a bigger property maybe commercial, sell and invest into a Delaware trust, I still want the income just not the residential rental headache

Dave Foster · Answer

@Steve Clement, These are all doable options if you want to eliminate the stress of self-management and still have consistent cash flow. Nobody ever went broke paying tax on profit, but it can certainly feel like a stab in all your hard work. Unless you do a 1031, you're looking at paying the tax and recapturing depreciation over the course of owning the properties as rentals. And that deferred tax could be working for you instead of going to the government.

If you decide to 1031 into passive opportunities like NNN or DSTs, you can consolidate them in your exchange instead of doing individual exchanges for each, but you would have to tighten up those time frames and be a bit more proactive. Unlike UPREITs, DSTs allow you to do a 1031 into another DST or back into brick-and-mortar real estate if you ever decide to get back in the market.

Jacque Mihovk · Answer

Hi Steve,

I sent you a private message as well, I’m a local investor in MA, would love to connect sometime and talk about your portfolio, what you are looking for next, and potential ways to get there.

Hope to connect soon.

Joseph Scorese · Answer

Steve, congratulations on building a portfolio that's completely paid off. That's a position many investors hope to reach.

Before making a decision, I'd compare the after-tax proceeds and cash flow from each option. A 1031 exchange into a professionally managed commercial asset or a Delaware Statutory Trust (DST) can reduce the day-to-day management responsibilities while continuing to generate income, but each comes with different liquidity, control, and return considerations.

Given your contracting background, you may also want to evaluate whether selectively selling one property at a time or refinancing to access equity better aligns with your long-term goals.

I'd recommend sitting down with a qualified CPA and a 1031 intermediary before making any moves. The right strategy depends on your income needs, estate planning objectives, and how involved you want to remain going forward.

Congratulations again on creating such a solid foundation over the past 40 years.

Caleb Brown · Answer

I would look at every solution and run numbers. Honestly it's preference and risk. If you are trying to wind down then 1031 might not be appealing, something simpler (even if the return is less) would be ideal.