Is trading homes for businesses to increase ROI smart?

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Is trading homes for businesses to increase ROI smart?

Account Closed
Contractor · Little America, WY · Member since 2018 · 19 posts · 21 votes

Hi,

I've been an investor and landlord in Utah for over 20 years. I have 10 homes paid off but now am not getting the return that I think is juicy enough. I have experience running small businesses and I am offering some of my rentals for exchange of business. Has anyone done this before and what was your experience? I did recently trade a laundromat I owned in West Jordan for a house in East Sandy and it worked out pretty good. The value for the business and house was around 350K and the business generated $60K/annually vs. the $20K/annually I get from the rental home. I am glad to get rid of laundromat but I see that my cash flow reduced quite a bit. The homes I'm looking at trading are all on the west side of Salt Lake County and most are 4-5 bedrooms single family rented at market rates of around $1,500. Any thoughts.

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  • Becca Summers
    Real Estate Agent · Highland, UT · Member since 2015 · 407 posts · 272 votes
    8y

    I've had a few clients sell their single family and 1031 into commercial buildings this year. I have one doing it right now. Selling two single families to buy the building his company is currently renting. I know a business broker I could set you up with if you wanted to buy businesses instead of trading them.

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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    8y

    @Account Closed said, you can harness at least a partial benefit from a 1031 exchange in a sale of house and purchase of a business.  As long as the business includes land/building you can do the 1031 and exchange for the real estate portion of the business.  The assets of the business cannot be purchased under the 1031 but you can still get some tax deferral.  And if the valuations worked out you may be able to 1031 a property completely into the land and building portion of the business or multiple businesses and use your own cash to purchase the FF&E

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  • Account Closed
    OP
    Contractor · Little America, WY · Member since 2018 · 19 posts · 21 votes
    8y

    I'm looking to maximize my return on money. My homes are worth about 3 million. I'm getting around 5-6% return by using that assett value as monthly income. If I have a business I could probably get 20% ROI. If I sell and put into a money market I get around 1%. Alot of multifamily gets 6-7 percent if your lucky but then I have to borrow money at 6% to get that return so thats why I'm looking at trading out to a business. Its all bout dem numbas!

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