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Andrew Farrell
  • Richmond, VA
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Hold or 1031 Exchange

Andrew Farrell
  • Richmond, VA
Posted Mar 28 2023, 11:29

I currently have a moderately profitable 3 bed/2 bath long term SFR that I plan on converting to an STR or an MTR... most likely an MTR as this is right next to a major hospital system with a lot of travel nursing demand. I informed my tenants that I would be unable to renew the lease ending in June but they are motivated to stay and unexpectedly made a good offer to buy the house.

At this point, I'm not sure which direction would be best. I could use a 1031 and roll into a small MF in a similar neighborhood that would be more efficient for the MTR strategy.  Typically, I see single or couple travelers that prefer a private one or two bedroom unit or if it's a shared unit/house they typically request a private bathroom. With my current 3/2, I could rent out only two rooms at a time to allow for private bathrooms and still be much more profitable then I am today with the long term tenants. However, a MF with 2-4 units at 2 bed/1 bath each, I could maximize my revenue per room/unit and be much more efficient.

I feel like I'm in a unique situation where I have motivated buyers with a good offer already in place which would allow me to avoid all of the work required to traditionally list the property, while also entering into a market with more buyer leverage once I sell the property. My concern however is that I haven't identified a replacement property and I worry I won't be able to complete a transaction in the required 180 days because of the low inventory and my specific deal criteria.

I welcome any and all thoughts on this one.

Thanks,

Andy




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