minor league achiever seeking pro level mentor

Investor · San Francisco, CA · Member since 2015 · 60 posts · 46 votes

Thank you for reading. Looking to brainstorm strategy, optimization and efficiency, likely a move from the SF Bay Area 24 unit portfolio to something(s) elsewhere. I have a well performing package of a handful of cash flowing SFR to a six unit, and 8 unit. Self manage for entire 25 yrs. I am 54 and am a partially retired real estate agent as well. Not looking for large scaling or involving any investors. Everything has been "my show". A bit of a numbers geek too. Let's chat. Thanks.

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Clayton Silva
Lender · CA · Member since 2018 · 638 posts · 393 votes
1y
Amazing to see the fruits of 25 years of diligent investing! Any idea of where you want to move that equity? Is the goal cash flow, appreciation or tax benefits?
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Noah Laker
Real Estate Broker · Sacramento, CA · Member since 2021 · 519 posts · 410 votes
1y
Hey John, thankfully there are worse problems to have. I'm a broker, investor, and PM (100+ LTR and STR) up in Sacramento. I recently had a client selling some San Francisco multifamily and intending to 1031 exchange out of the city (for obvious reasons).
My first question was: where will you go?
It's a financial decision but it's also a lifestyle decision. There are also other tax plays, like the STR loophole and bonus depreciation which is being reinstated, which might be challenging to execute for most folks in a place like San Francisco.
Having disclosed my bias, I’ll tell you that chose Sacramento because it’s close enough to manage, and we have a great network here. Plus, you don’t have to worry about “clawbacks” from exchanging out of state.
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
1y
@John Barnette, if you want to scale down a bit and consolidate your RE portfolio, you could do what we call a consolidation exchange, where you sell multiple smaller investment properties and purchase a few larger investment properties in a 1031 exchange. A strategy like this could cut down the need to manage multiple properties and allow you to find a more attractive area with a better performance potential, while deferring all of the tax and depreciation recapture.

This could also be a very attractive time to simply re-position the equity in your portfolio into more of a cash flow play while lowering risk. Sell your properties and replace them with some properties purchased for cash (your safety net cash flow play). And purchase some others with more debt to absorb the rest of your reinvestment requirements. Or place the debt and some small amount of equity into a passive Delaware Statutory Trust, which will completely absorb the debt you have with the non-recourse debt of the DST. Leaving you with only debt-free properties that continue to cash flow for you.

I also like the STR rental aspect that @Noah Laker was talking about as a way to get access to even more appreciation. If you're into that sort of thing.

I don't know how wed you are to the Bay or CA in general. But you can use the 1031 to move to any other location and type of real estate, including tax-free states like NV, WA, FL, and TN. If you change your residency, you'll also eliminate state taxes. Just moving the property will still leave you at the mercy of the CA tax machine.
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