My primary issue at this time is the lack of inventory and the 1031 timelines makes it difficult.Some might say to 1031 into DST's or OZ funds, but there are so many arguments for and against, especially since some have restricting or stopping their distributions lately I've heard. 

I only invest in states where the state gov has restricted local municipalities from restricting STR's.

Washington state’s capital gains tax, passed in 2021, imposes a 7% tax on any gains of more than $250,000 from the sale of stocks and bonds, with some exceptions.

In the end, a majority of inspectors would likely appreciate the fact that you will end up improving the condition and make it safer; especially if you are not trying to use the space as additional utility space or living space; just as long as the Zoning Reviewer doesn't pick your project to become an issue, or just as long as you are not hiding an illegal unit which an inspector notices once on site...One final note;In regards to deconverting your property to a single-family residence in the future; with the Zoning TSL Expansion, many Zoning designations are restricted from deconverting properties away from an existing Multi-Unit condition.

Long Beach has strict rental restrictions for STRs so you would want to make sure you are looking for a homes within the right zoning. 

@Tyler Herman,401k loan proceeds become your personal capital; you can use those funds however you wish, and there are no restrictions. 

The restrictions you'll face with this is mainly due to zoning laws in your particular area, unless the zoning allows for more units or FAR (floor area ratio). 

I currently manage mostly short term rentals with a few midterms sprinkled into areas that have STR restrictions.

Hi Amanda, DSCR loans are becoming a popular financing option for investors since there are no restrictions on the number of loans you can have, and you can qualify based on the rents covering the full mortgage payment, no personal DTI needed. 

Nowadays, there are a bunch of lenders that claim to be NonQM lenders but so many restrictions.