NEED ADIVICE: Keep Property? Sell & 1031? Other options?

Question

Hello BP community,

I'm hoping to get some perspectives and advice on a situation that I have with my property in Phoenix, AZ.

I currently have a SFH + studio that is set up as a STR. It's in a good location with a potential for a buy out from a nearby hospital in the future (possibly far future, who knows?) However, it's been negatively cashflowing every month.

I talked to a couple of property management companies about converting it to a long term/regular rental instead. With that approach, I could cashflow between $500~$700 per month.

I also looked at what I could sell the property for to do a 1031 into several other properties but the average sale price is about $20K less than what I bought it for, so I'd be losing some capital if I sold it now.

Looking for guidance on some ideas I have and what the pros and cons are.

1) Do I just convert this Phoenix property to a regular rental earning $500~$700 per month?

Or

2) Do I sell it (at a slightly lower cost than when I bought it), and 1031 into 3~4  other properties that would cashflow a total of upwards of $2,000 per month?

Or

3) Do I convert this Phoenix property to a regular rental, buy another property with some capital that I have and perhaps earn $900~$1,000 per month total cashflow?

Or

4) Another option I'm not aware of?

Thanks, H

Andrew McGuire · Answer

Doesn't matter if it sells for less than purchased in my opinion. I would look at how much equity is in it and what is the return, in this case loosing money monthly would certainly make me want to sell but were not done yet. What is the interest rate and principal pay down? Do you need it to offset your income, I've kept or sold properties based off of depreciation.

Mason Weiss · Answer

Hey Howie, I like option 1 or option 2. If you can get $2K cash flow with a different property it would not be long before you can erase that $20K deficit. If you feel good about the property's long term outlook, then consider holding it and making both units long term rentals.

Patrick O'Sullivan · Answer

Hey Howie,

You're already doing a great job thinking through your options and looking at both short- and long-term implications—kudos for being proactive.

A few thoughts that might help clarify things:

1. Converting to a long-term rental:
If you can cashflow $500–$700/month as a traditional rental, that’s not bad, especially if it stabilizes your income while you wait to see what happens with the potential hospital buyout. It also avoids locking in a $20K capital loss today. This path buys you time while still generating some cashflow.

2. Selling and 1031 exchange:
The 1031 option sounds attractive from a cashflow standpoint, especially if you can exchange into 3–4 properties and generate $2K+/month. The downside, of course, is the capital loss and transaction costs, plus the time and effort of finding multiple replacement properties in today’s competitive market. But if your goal is maximizing income now, this could still be worth it long term.

3. Convert to LTR + buy another property:
This seems like a middle ground—keeping your current property for modest income and appreciation potential, while putting new capital to work elsewhere. It could be a good way to diversify and scale gradually, especially if you’re still early in your investing journey.

4. Other options (as Drew mentioned):
Given you're near a hospital, medium-term rentals (MTRs) might be worth exploring—platforms like Furnished Finder or even direct outreach to travel nurse agencies could be a way to boost income without the high turnover and management headaches of STRs.

Ultimately, your decision might come down to your primary goal: Are you optimizing for cashflow now, long-term appreciation, or portfolio growth?

Hope this helps as you weigh the tradeoffs—keep us posted on what you decide!

Drew Sygit · Answer

It's odd that you're losing money as an STR, but will make money as an LTR.

Can only mean that the property has high STR vacancy.

Why don't you post listing and ask for help on fixing that?

Otherwise, have you considered MTR and putting on FurnishedFinders?

Being near a hospital, it should get decent attention from traveling nurses, med students in residency, etc.

Howie Lee · Answer

Hi Drew,

Yes, it has high vacancy rates. I have gotten months where there's not a single booking (especially summer). I've already switched management companies but I'm not really seeing much improvement.

Furthermore, the utility expenses are really high when I have guests stay that's a big chunk of the expenses.

I originally purchased it close to the hospital exactly because I thought I could get a steady flow of guests from traveling nurses, etc.

But my previous property mgmt indicated that it's because most travelling nurses prefer to stay in Scottdale and not near the hospital. I have no way of validating that.

I haven't considered furnishedfinders. I know that furnishedfinders isn't like airbnb/vrbo. It requires much more active participation, coordination.