Trading my Single Family Homes for multifamily properties

[Logan M.]

Over the last few years, I have been able to build up a portfolio of over one hundred and fifty rental units. Within that, I have eleven single-family homes. Being located in Utah means that I have been able to gain a ton of appreciation while just like everyone else over the last few years I have had many with interest rates sub 4% down to 3.5%.

I have been going back and forth with selling my SFHs and moving them into larger multifamily properties. A few of my concerns are the timing of things, will I be able to sell now for top dollar or do I wait and put myself into a more difficult situation finding the multifamily properties when the market is stronger as rates come down?

I am also worried because everyone tells me to never sell anything which makes sense but if I can deploy the same capital into something bigger wouldn't I make more in the big picture?

Has anyone moved all of their SFHs into larger multifamily via 1031 exchanges, what was your experience through the process and what am I missing? I have seven mobile home parks now so I feel like I can manage something larger without a problem on that end.

[Dave Foster]

@Logan M., a couple other considerations - 

1. The interplay between the MF and SF markets.  These are two different classes of real estate and peak at different times in a cycle and trough at different times in a cycle.  So, where do you feel these two cycles are?

2. Another very common reason to do what your contemplating later in a run up market is to sell SFs that may have potential cap ex issues and 1031 into newer properties with less cap ex exposure.

3. Of course, if there's a value add potential then that is the reverse of #2 but you're running toward cap ex exposure for the sake of forced appreciation.

I would interpret "makes sense" as "what makes sense to you given your strengths and preferences.  And not just  a return figure.