Switching from long term rentals to short term rentals

[Ronald Cooperman]

I am 65 and started investing in B- 3 br 1ba properties in NJ. My Ave property cost 80,000 and rents for 1100/m. Turnover is very low. I own 60 of these with very little problems

I am looking to get advice about selling this portfolio and buying STR's.

I am looking for advice from members who have done this. Help on strategies where to buy, 1031 exchange, should I buy existing STR's,is it worth the move.

[Dave Foster]

@Ronald Cooperman,  The key to a transition like this would be timing and flexibility as far as the 1031 and reposition is concerned.  You'll want to bunch several of these sales into each one of your STRs. This is no problem and a very common strategy called a consolidation exchange.  It's doubtful you'll sell all that you want at once (unless a portfolio sale and right now I don't think you need to do that).  So timing and combination into your purchase will be an evolving strategy.  But easily enough done.

the bigger question is where do you want to invest.  Here's my short list for various reasons:

1. Anywhere that @Paul Sandhu does not invest for starters :)

2. Where do you like to vacation?  Given you age and desire to transition it's only natural that part of slowing down is using your properties for some personal use.  The IRS specifically allows this and it's a great benefit to save the money you would normally spend on a vacation and drop your suitcase in your own house.  Ski in the winter, fish in the summer, enjoy the colors in the fall...  You could position your much smaller portfolio anywhere you want depending on your tastes.

3. Tax free states.  The reason for this is that a very common 1031 strategy is to combine several rentals into a really nice place where you'd like to retire.  After using that property for a year or two as investment you move in and convert into your primary residence.  The tax on gain stays deferred.  But you can sell your old primary and start your retirement with the first $500K of profit in your pocket tax free.  And wouldn't it be nice if your new state didn't have a state income tax?!!

In our first retirement we lived on our sailboat bought with the tax free dollars from primary residences.  And when we needed a break we looked at the availability calendar for one of our STRs, packed a duffel bag and enjoyed a mini vacation wherever we were open.  It's a great plan.