1031 exchange my SFR's to MF?

Question

Hi everyone,

I currently have 9 SFR's in 3 different states and want to sell them as a portfolio and then 1031 them into a small multifamily.  Are there brokers out there that can sell off all 9 in a portfolio since they are in 3 different states or will I have to sell them off in 3 separate packages?  And is this a strategy that makes sense?  All 9 currently cash flow and are above the 1% rule.

Thanks,

Kyle

Dave Foster · Answer

@Kyle Mitchell, You're probably on the best portal for such a sale right now.   I don't think any one realtor in any one state could handle such a thing effectively.  But right here at BP nation there's a heap of folks who've done exactly what you did or who want to.  So I'd throw it out on the market place.  You also might do some research and see if one of the turn key operators here happen to be active in all three of those states.  If so then they might be a source for you as well.

Honestly though I think you'll probably lose more in the portfolio haircut across three states of SFRs than you would save in making it a portfolio for your 1031.

When I say that what I mean is that it's really more likely that you'll be able to cluster those sales into a period where several or even all of them can go forward into one replacement property.  There is some timing benefit to a portfolio because there is only one 1031 calendar.  But I'd explore trying to cluster individual sales and maximize the value of each property as a stand alone.

Another option would be to do a reverse exchange and have your QI purchase the new property and hold it for you until you sell your old properties.  The reverse exchange is a little more expensive but I doubt it comes close to the discount you'd have to give for a multi state portfolio sale.  When you do a reverse exchange you have 180 days to sell your old properties.  If you time the selling seasons right that shouldn't be a problem.