Switching from long term rentals to short term rentals

Short-Term & Vacation Rental Discussions
5yFollow

Switching from long term rentals to short term rentals

Ronald Cooperman
Member since 2019 · 117 posts · 45 votes

I am 65 and started investing in B- 3 br 1ba properties in NJ. My Ave property cost 80,000 and rents for 1100/m. Turnover is very low. I own 60 of these with very little problems

I am looking to get advice about selling this portfolio and buying STR's.

I am looking for advice from members who have done this. Help on strategies where to buy, 1031 exchange, should I buy existing STR's,is it worth the move.

1Reply
43 views

Most Popular Reply

Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
5y

@Ronald Cooperman,  The key to a transition like this would be timing and flexibility as far as the 1031 and reposition is concerned.  You'll want to bunch several of these sales into each one of your STRs. This is no problem and a very common strategy called a consolidation exchange.  It's doubtful you'll sell all that you want at once (unless a portfolio sale and right now I don't think you need to do that).  So timing and combination into your purchase will be an evolving strategy.  But easily enough done.

the bigger question is where do you want to invest.  Here's my short list for various reasons:

1. Anywhere that @Paul Sandhu does not invest for starters :)

2. Where do you like to vacation?  Given you age and desire to transition it's only natural that part of slowing down is using your properties for some personal use.  The IRS specifically allows this and it's a great benefit to save the money you would normally spend on a vacation and drop your suitcase in your own house.  Ski in the winter, fish in the summer, enjoy the colors in the fall...  You could position your much smaller portfolio anywhere you want depending on your tastes.

3. Tax free states.  The reason for this is that a very common 1031 strategy is to combine several rentals into a really nice place where you'd like to retire.  After using that property for a year or two as investment you move in and convert into your primary residence.  The tax on gain stays deferred.  But you can sell your old primary and start your retirement with the first $500K of profit in your pocket tax free.  And wouldn't it be nice if your new state didn't have a state income tax?!!

In our first retirement we lived on our sailboat bought with the tax free dollars from primary residences.  And when we needed a break we looked at the availability calendar for one of our STRs, packed a duffel bag and enjoyed a mini vacation wherever we were open.  It's a great plan.

The 1031 Investor5137 Reviews
WebsiteView Page
6Reply
See this reply in the discussion

11 Replies

Jump to latestLatest
  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    5y

    If I were 65 I would sit tight right where you're at. STR is more work and if you use a manager you won't make much money at all.

    If anything trade for multi family but in this market you’ll never get the numbers you already have 

    Podcast Guest on Show #30
    1Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    5y

    STR'S are alot more work.

    I would just keep doing what your doing.

    1Reply
  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    5y

    Want to know what I've experienced with my STRs?  Dead bodies, overdosing people, rattlesnakes, people that won't move out, one tenant fooling around with another tenants wife, break ins, confronting intruders.

    1Reply
  • Joshua Strickland
    Investor · Flowery Branch, GA · Member since 2019 · 413 posts · 412 votes
    5y

    I agree with others here. STRs are more work and if you are using a PM they typically take a larger revenue percentage than LTR PMs. 

    I’d recommend @Dave Foster if you are going to 1031. I’m doing one now with his company now and he’s been able to answer all my questions.

    2Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y
    Originally posted by @Paul Sandhu:

    Want to know what I've experienced with my STRs?  Dead bodies, overdosing people, rattlesnakes, people that won't move out, one tenant fooling around with another tenants wife, break ins, confronting intruders.

     What, no shootouts yet? Those are fun...

    0Reply
  • Jabbar Adesada
    Rental Property Investor · Beaufort, SC · Member since 2020 · 119 posts · 98 votes
    5y

    @Paul Sandhu

    Geez man, you are hard core…

    0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Ronald Cooperman,  The key to a transition like this would be timing and flexibility as far as the 1031 and reposition is concerned.  You'll want to bunch several of these sales into each one of your STRs. This is no problem and a very common strategy called a consolidation exchange.  It's doubtful you'll sell all that you want at once (unless a portfolio sale and right now I don't think you need to do that).  So timing and combination into your purchase will be an evolving strategy.  But easily enough done.

    the bigger question is where do you want to invest.  Here's my short list for various reasons:

    1. Anywhere that @Paul Sandhu does not invest for starters :)

    2. Where do you like to vacation?  Given you age and desire to transition it's only natural that part of slowing down is using your properties for some personal use.  The IRS specifically allows this and it's a great benefit to save the money you would normally spend on a vacation and drop your suitcase in your own house.  Ski in the winter, fish in the summer, enjoy the colors in the fall...  You could position your much smaller portfolio anywhere you want depending on your tastes.

    3. Tax free states.  The reason for this is that a very common 1031 strategy is to combine several rentals into a really nice place where you'd like to retire.  After using that property for a year or two as investment you move in and convert into your primary residence.  The tax on gain stays deferred.  But you can sell your old primary and start your retirement with the first $500K of profit in your pocket tax free.  And wouldn't it be nice if your new state didn't have a state income tax?!!

    In our first retirement we lived on our sailboat bought with the tax free dollars from primary residences.  And when we needed a break we looked at the availability calendar for one of our STRs, packed a duffel bag and enjoyed a mini vacation wherever we were open.  It's a great plan.

    The 1031 Investor5137 Reviews
    WebsiteView Page
    6Reply
  • Bob Wilson
    Rental Property Investor · Chicago, IL · Member since 2019 · 51 posts · 31 votes
    5y

    Generally speaking, I agree with @Luke Carl & @John Underwood. STR's (assuming AIRBNB style), is much more work and headache. But curious, why are you even considering a move?

    I'm assuming something isn't working.

    Is it you need better returns, or what exactly is motivating you to consider a switch after acquiring 60 units, and 60+ in age?

    1Reply
  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    5y
    Originally posted by @Bruce Woodruff:
    Originally posted by @Paul Sandhu:

    Want to know what I've experienced with my STRs?  Dead bodies, overdosing people, rattlesnakes, people that won't move out, one tenant fooling around with another tenants wife, break ins, confronting intruders.

     What, no shootouts yet? Those are fun...

    I forgot to mention 2 other incidents at my STRs. 1 involved the same prostitute at 3 properties, the other involved 2 strippers.  I won't repeat the stories, since I've already told it on here.

    0Reply
  • Zambricki Li
    Real Estate Agent · Los Angeles CA + Lake Tahoe, NV and CA · Member since 2021 · 180 posts · 158 votes
    5y

    @Ronald Cooperman

    You can do it!!

    I have both Str and Ltr and disagree with others who say you should change up because of your age.

    Seems like you want to have some fun and try new things. That’s great. You can start and 1031 something. See if you like it. You need to test it. From your location in New Jersey - I recommend Burlington, VT, by the lake so you can also rent it in the summer

    If you want to stretch father I suggest

    A) Scottsdale,,Arizona

    b) Tampa, Florida

    C) Myrtle Beach, SC

    If you have any interest in going even further I have opps in CA and NV send me a message anytime and I’m happy to help.

    Good luck!!

    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    5y

    If you do decide to do the transition - don't do it all at once.
    Purchase a couple of STR's and see if they make sense.

    You may not even need to sell your portfolio. You may be able to see if they are eligible to be transitioned to a STR rental now.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
    View Page
    2Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free