1031 Exch $2M Rental Property with 5% Gross Yield to High-Yield Opportunities

[Li Li]

I am considering a 1031 exchange to transition from a rental property with a 5% gross yield to investments in areas like Georgia or North Carolina, aiming for higher returns. Seeking Advices and suggestions on what type investment is the best

Multiple Single-Family Rentals: Diversifying into several single-family homes can spread risk and potentially increase returns.

Multifamily Properties: Investing in duplexes, triplexes, or larger apartment complexes can offer higher yields and economies of scale.

Specialty Properties (e.g., Event Venues): Purchasing a property like a ranch for hosting events is possible

[Rick Albert]

To be honest, all of them work, it just depends.

What I have been learning over the years for me is I prefer 2-4 unit properties. Here's why:

-Management: One property tax bill, one mortgage, one insurance bill, etc. It is simpler and possibly faster to scale.

-Spreading costs: One sewer line, one roof, etc. Recently I had to trim back a tree that cost almost $5K. That cost would have been the same whether it was a single family home or a triplex. Some property managers will also give discounts depending on the number of doors. That means with MFU, you can hit those discounts faster.

-I would argue there can be more risk with single family homes. If it is vacant, that's 100% vacancy. If you have one vacancy in a fourplex, it is only 25% vacant.

With that said, people are killing it in the single family space and specialty property. You are going to get a wide range of opinions here and they are all right...for them. You need to decide what makes sense for you. This includes your short term and long term goals.

Good luck!