Hi all, I'm doing a 1031 exchange for my parents' retirement for the first time (working through IPX). I've identified a property that is close to me in Pennsylvania and it's decent price but it's not cheap and requires some renos. I'm under contract with that. With the rest of the 1031 (about $1.2M leftover), I can do one more in the area or I can do even up to 3 if I'm willing to take a plane ride and go to a different city. Mainly because the homes are cheaper. I understand there are a lot of variables at play here, but my initial logic is that I can make my money back faster with 3 than 1. If I use that $1.2M to buy one home that's close I also realize I can probably charge more since it'll be a bigger house (5bd+). But with 3 at 3bds in a decent STR market, I have to think I'll make back that money faster with 3 decent homes instead of 1 bigger home. I'd appreciate any feedback on this and how I should think through my approach because I want to make sure my parents' investment is in an appreciating area that is flexible for STR/MTR/LTR if I need to switch things up.
My experience is that I've run one STR before and am confident I can spin up remote operations with a property or area manager. 3 at once seems risky and a bit daunting, but I'm willing to do it. Oh and any suggestions on solid STR areas I should explore would be very helpful.
Hi all, I'm doing a 1031 exchange for my parents' retirement for the first time (working through IPX). I've identified a property that is close to me in Pennsylvania and it's decent price but it's not cheap and requires some renos. I'm under contract with that. With the rest of the 1031 (about $1.2M leftover), I can do one more in the area or I can do even up to 3 if I'm willing to take a plane ride and go to a different city. Mainly because the homes are cheaper. I understand there are a lot of variables at play here, but my initial logic is that I can make my money back faster with 3 than 1. If I use that $1.2M to buy one home that's close I also realize I can probably charge more since it'll be a bigger house (5bd+). But with 3 at 3bds in a decent STR market, I have to think I'll make back that money faster with 3 decent homes instead of 1 bigger home. I'd appreciate any feedback on this and how I should think through my approach because I want to make sure my parents' investment is in an appreciating area that is flexible for STR/MTR/LTR if I need to switch things up.
My experience is that I've run one STR before and am confident I can spin up remote operations with a property or area manager. 3 at once seems risky and a bit daunting, but I'm willing to do it. Oh and any suggestions on solid STR areas I should explore would be very helpful.
Thanks in advance, Dan
Hi Dan!
You're thinking through the right variables as you consider how best to use the remaining $1.2M from your parents' 1031 exchange. The idea of purchasing three smaller properties versus one larger, local property has solid merit. With three properties in strong short-term rental (STR) markets, you’re likely to generate more total cash flow and benefit from income diversification. If one property underperforms or sits vacant, the others can help balance it out. You also gain more exit flexibility and possibly better ROI, particularly in affordable areas with strong tourism demand. That said, the trade-off is added complexity—managing remote properties across multiple cities, even with good local managers, introduces operational challenges and a steeper learning curve. On the other hand, purchasing one larger home close to you allows for hands-on oversight, especially helpful if the property requires renovations. A larger home might command premium bookings for groups or retreats, and if the STR market cools, it’s easier to pivot to a mid- or long-term rental strategy locally.
As for markets to consider, if you stay close to Pennsylvania, the Poconos still perform well for STRs, and Lancaster or Gettysburg offer growing tourism potential. Going further afield, areas like the Smoky Mountains in Tennessee, Panama City Beach or Destin in Florida, Flagstaff or Prescott in Arizona, and parts of Northern Georgia and Western North Carolina all offer strong STR demand, appreciating home values, and generally landlord-friendly environments. If you opt for multiple properties, just be mindful of varying local STR regulations and compliance burdens. From a 1031 standpoint, ensure that the total value of the replacement properties meets or exceeds what was sold, and that debt is properly replaced or offset with cash. Ultimately, if you're confident in your ability to manage remote teams and operations, going with three properties could offer stronger long-term returns. However, starting with the local property may provide a smoother ramp-up while giving you time to research and scale intelligently. If you're up against timing issues, combining a property purchase with a DST or Tenant-in-Common structure could also help defer taxes while maintaining flexibility.
Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
1y
@Dan Steele, This strategy is what we call a diversification exchange, which is when you sell a large investment property and acquire multiple smaller investment properties in a 1031 exchange.
Investors will use diversification exchanges to reach different markets or even other states while deferring the tax and depreciation. And exactly as you're proposing - creating a portfolio mix that maximizes cash flow.
For you, flexibility might end up looking like some intermediate steps. Buy one STR and a couple of smaller LTRs. Then, as you feel confident and want to scale, you later sell your LTRs and 1031 into new STRS that you can immediately put into service with your systems established for your first STR.
Hi all, I'm doing a 1031 exchange for my parents' retirement for the first time (working through IPX). I've identified a property that is close to me in Pennsylvania and it's decent price but it's not cheap and requires some renos. I'm under contract with that. With the rest of the 1031 (about $1.2M leftover), I can do one more in the area or I can do even up to 3 if I'm willing to take a plane ride and go to a different city. Mainly because the homes are cheaper. I understand there are a lot of variables at play here, but my initial logic is that I can make my money back faster with 3 than 1. If I use that $1.2M to buy one home that's close I also realize I can probably charge more since it'll be a bigger house (5bd+). But with 3 at 3bds in a decent STR market, I have to think I'll make back that money faster with 3 decent homes instead of 1 bigger home. I'd appreciate any feedback on this and how I should think through my approach because I want to make sure my parents' investment is in an appreciating area that is flexible for STR/MTR/LTR if I need to switch things up.
My experience is that I've run one STR before and am confident I can spin up remote operations with a property or area manager. 3 at once seems risky and a bit daunting, but I'm willing to do it. Oh and any suggestions on solid STR areas I should explore would be very helpful.
Thanks in advance, Dan
Hi Dan!
You're thinking through the right variables as you consider how best to use the remaining $1.2M from your parents' 1031 exchange. The idea of purchasing three smaller properties versus one larger, local property has solid merit. With three properties in strong short-term rental (STR) markets, you’re likely to generate more total cash flow and benefit from income diversification. If one property underperforms or sits vacant, the others can help balance it out. You also gain more exit flexibility and possibly better ROI, particularly in affordable areas with strong tourism demand. That said, the trade-off is added complexity—managing remote properties across multiple cities, even with good local managers, introduces operational challenges and a steeper learning curve. On the other hand, purchasing one larger home close to you allows for hands-on oversight, especially helpful if the property requires renovations. A larger home might command premium bookings for groups or retreats, and if the STR market cools, it’s easier to pivot to a mid- or long-term rental strategy locally.
As for markets to consider, if you stay close to Pennsylvania, the Poconos still perform well for STRs, and Lancaster or Gettysburg offer growing tourism potential. Going further afield, areas like the Smoky Mountains in Tennessee, Panama City Beach or Destin in Florida, Flagstaff or Prescott in Arizona, and parts of Northern Georgia and Western North Carolina all offer strong STR demand, appreciating home values, and generally landlord-friendly environments. If you opt for multiple properties, just be mindful of varying local STR regulations and compliance burdens. From a 1031 standpoint, ensure that the total value of the replacement properties meets or exceeds what was sold, and that debt is properly replaced or offset with cash. Ultimately, if you're confident in your ability to manage remote teams and operations, going with three properties could offer stronger long-term returns. However, starting with the local property may provide a smoother ramp-up while giving you time to research and scale intelligently. If you're up against timing issues, combining a property purchase with a DST or Tenant-in-Common structure could also help defer taxes while maintaining flexibility.
Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.
This is beyond valuable insights Lauren. You read my mind in terms of concerns and also provided valuable markets to look into. I'll digest this and come back to you with any questions if that's alright. Sent you a connection request
Realtor · Myrtle Beach, SC · Member since 2016 · 350 posts · 204 votes
1y
Hey @Dan Steele, not sure if you have any familiarity with the Myrtle Beach area, but this would be a great market to consider for an STR purchase (or 2 or 3). Let me know if your research happens to point you this way and I'd be happy to lend my assistance.
Lender · Miami, FL · Member since 2017 · 1k+ posts · 797 votes
1y
@Dan Steele, reach out to @Josh Green if you’re interested in FL. Josh runs a solid operation of high performing STRs that you’ll likely be interested in after speaking with him. He’s helped a ton of my investors in the past and can do the same for you. He’s also an investor/investor focused realtor.
Real Estate Agent · Nashville, TN · Member since 2025 · 125 posts · 62 votes
1y
Great question and kudos for helping your parents build long-term wealth with a 1031. You're absolutely right—there's a trade-off between managing fewer high-value properties close to home vs. scaling out with multiple mid-tier assets in other STR-friendly markets.
A few things to consider:
Risk diversification: Spreading the $1.2M over 2–3 properties in different markets could reduce reliance on one property or one local economy.
Operational load: Managing multiple STRs remotely is doable but will require strong systems and trusted boots on the ground. Since you’ve done it before, you know what that setup looks like—but scale adds complexity.
Exit flexibility: Smaller properties may be easier to offload in the future if market conditions change or you want to reposition assets.
As for STR markets, consider areas with:
Year-round tourism (think Smoky Mountains in TN, parts of FL/Carolinas, Blue Ridge GA)
Friendly regulations
Strong occupancy + ADRs
Decent long-term rental fallback
If you’re okay traveling and setting up ops in a new market, the returns from 2–3 well-performing STRs might edge out a single high-end one. But if peace of mind and proximity matter more, there’s nothing wrong with going for the close-to-home option.
Happy to dive into specific markets or help model out the options if helpful!
Hi all, I'm doing a 1031 exchange for my parents' retirement for the first time (working through IPX). I've identified a property that is close to me in Pennsylvania and it's decent price but it's not cheap and requires some renos. I'm under contract with that. With the rest of the 1031 (about $1.2M leftover), I can do one more in the area or I can do even up to 3 if I'm willing to take a plane ride and go to a different city. Mainly because the homes are cheaper. I understand there are a lot of variables at play here, but my initial logic is that I can make my money back faster with 3 than 1. If I use that $1.2M to buy one home that's close I also realize I can probably charge more since it'll be a bigger house (5bd+). But with 3 at 3bds in a decent STR market, I have to think I'll make back that money faster with 3 decent homes instead of 1 bigger home. I'd appreciate any feedback on this and how I should think through my approach because I want to make sure my parents' investment is in an appreciating area that is flexible for STR/MTR/LTR if I need to switch things up.
My experience is that I've run one STR before and am confident I can spin up remote operations with a property or area manager. 3 at once seems risky and a bit daunting, but I'm willing to do it. Oh and any suggestions on solid STR areas I should explore would be very helpful.
Thanks in advance, Dan
That's a lot of capital. Typically, STR is a strategy to make money rather than hold for retirement/appreciation due to the market dynamics those properties are often in. Have you considered something easier, or thought bigger, where you can force appreciation since you are planning renovations anyway - maybe a hotel or a venue?
