All Forum Posts by: Steven Andrews

Hi everyone,

I'm looking for a layman's explanation of how a 1031 exchange works. I did some searching in threads and many of the explanations are pretty complicated. Can someone post a simple step by step guide to the process?

And here are a few questions I have:

1. Do I need to sell my current investment property before starting a 1031 exchange or do I exchange with an offer on a new property at the same time?

2. If I sell first is there a time by which the funds need to be reinvested to qualify for the 1031 exchange (next 6 months, 12 months,etc.)?

3. Do all of the proceeds have to be used? E.g. I have a property for sale that will net 100K. Do I have to apply all 100K to a new property or can I apply only 20K or 40K?

4. I understand a company has to "process" the 1031 Exchange for me. Does that company have to be in the same state as me or as the state where the property will be purchased?

5. Are there any people here affiliated with a company that handles 1031 exchanges?

I think that's about all for now. Thanks in advance for the help with understanding how it works.

Steven

@Luke Meeker Most LTR prop managers will ask for 20% for the first month and 10% thereafter. That upfront cost seems high. Re-negotiate with them or find someone else. There are plenty of others.

We use the Kwikset Smart key technology as well in our LTRs. Very easy to rekey to provide a new set of keys to new tenants each time. Best of luck on the new property @Brad Taylor

Ironic that there is new activity on this post on the same day a named tropical storm is hitting Galveston.

I own a vacation rental - a condo in Pointe West. It has a tremendous history and has brought in 40-50K gross over the last three years. PW is a fantastic area with the beach club and all of the amenities.

A few notes about vacation properties in Galveston:

1. If you're out of state keep in mind that property taxes in Texas are high, in fact Texas is in the top 5 highest property tax states in the country. So definitely figure that into your analysis. The flip side is property costs are low, much lower than other beach vacation spots like California or Florida.

2. Use a local lender. They understand the landscape the best and can help you best understand the real insurance needs of a condo or beach house (see 3).

3. Don't overpay for the insurance plan. Most insurance brokers for example are going to try to sell you flood as a part of the insurance package. You don't need it. Most Galveston properties are on stilts, high rise condos, a block or two from the beach or back far enough from the beach that flooding is not an issue. If your house or condo floods that means the whole of Galveston island is underwater and it's all going to have to be rebuilt anyway. That said, insurance costs are still higher than other locales, figure $40-50 a month.

4. If you're looking at property managers for a vacation rental let me know. The going rate is 20% and there are multiple companies that offer that. Happy to PM anyone with recommendations. Self-mangers definitely do better but the ones who do best actually live on the island or in south Houston as opposed to remote management.

5. HOA costs vary depending on locale, everything from $200 to $1000/month so pay attention to that in your analysis. I can answer via PM any questions on which condo complexes bring in the best income. And most realtors are happy to provide the rental history for the unit if it has been a STR vacation rental.

6. VRBO and Homeaway are the top sites as opposed to AirBNB for Galveston vacation rentals. Most people list there and get most of their guests from those two. Galveston is very seasonal so most of your income will be March-September and the offseason is pretty slow, so plan your deep cleaning, bug spraying, maintenance, etc in the offseason. Also the salty air tends to be hard on properties so adjust your maintenance up slightly for your calculations.

7. Beware of Spring Breakers and college kids. Most places have a 23 or 25-year-old minimum age requirement and screen guests to weed out the party-goers who will destroy your unit. That solves most all of the problems.

8. There's alot more to do than people think and Houston attractions are just an hour away. Most people vacationing in Galveston are from Houston, then Texas, then the OK-AR-LA region. Very few out of staters beyond that except for some winter snowbirds looking for less expensive places than California or Florida.

You can make money in Galveston as long as you are diligent with the numbers like anywhere else and understand how things work. And hurricanes are just as likely to hit Galveston as they are anywhere else in the Gulf or SE Atlantic. It's part of beach life...

Hope that helps.

@Ken Latchers I totally understand how dynamic pricing works. If you don't like vacation rental property managers don't reply to a thread on them. There's no need to impugn the intelligence of those owners who use them.

@Ken Latchers hence this thread... I've found quite a number of good prop managers in the 15-20% range that help make it more profitable for people who can't self-manage. 

@Kenny Dahill Any market is fine. Just trying to get a 40,000-foot view to see what's out there.

For example, here's a realty firm that also does vacation rental management in North Carolina for 15-20%: https://www.sunsurfrealty.com/...

I've found other similar companies in that range in other places. Just trying to see what anyone else knows.

Thanks for the responses John and Lucas. I understand what prop management companies do and how the commissions work and I understand the non-commission benefits/savings of self management. But for those who aren't able to self-manage or don't want to....

I return to my original question...

Anyone know any good local, boutique, low-commission but full-service property management companies? I've met a few owners/operators of them here on BP but hopefully members can shed light on others. Thanks!