1031 Exchange - Curious who has been through it and their thoughts on this situation

[Bryan S.]

Hi BP World!

I bought a property in 2020 that has been an Airbnb for the past 4 years. It has gone up ~$300k in value since purchasing.  I'm looking to sell and buy a small LTR apartment complex.  

Has anyone done a 1031 exchange like this? Curious BP's take on things to watch out for along the process.

Thanks,

Bryan

[Dave Foster]

@Bryan S., I always found that the steepest part of my learning curve as I transitioned from SFR to STR to Commercial land development and MF (all using 1031 exchanges) was learning what "didn't translate" from the prior type. Marketing, management, deal underwriting are all very different. It's almost a question of not knowing what you don't know. So learning the questions to ask is key. And you've started at a great place here in these forums.

From the 1031 perspective, however, there isn't any difference at all.  Since you can 1031 from any type of property anywhere in the US (if you're selling in the US) the 1031 will be performed the exact same.  

About the only difference you'll see is that the due diligence clock for a MF like this will be slower. This can be a problem if you wait to get your new property under contract after the closing of your sale. But if you use a letter of Intent or a contract with plenty of exits for your purchase this can be a huge benefit for you. Since you can get the new property under an LOI before your old property closes. And still have plenty of time to get your old property sold with all of the due diligence tick points you'll have with a MF.