1031 Exchange Buyers –

30-day Rentals, New Construction Developments, and ADU’s

I’ve had a few conversations lately with buyers participating in 1031 exchanges. Essentially, the strategy allows them to defer capital gains tax on the sale of an investment property by transferring the basis to a newly acquired like kind property of equal or greater value within 180 days from closing on the sale of the current property. There are nuances of this strategy that can be found online or by talking with a professional, but the purpose of this post is to share some strategies for quickly identifying new properties to exchange into here on the peninsula. 

30 Day Rentals

If I were looking into a like kind exchange, 30-day rentals would be on my list of options to pursue. One thing to consider is that the rates have such a wide range depending on the season and local happenings like golf and car shows that bring significant premiums. I think it’s important to budget for lows with your earnings during the highs and keep in mind that it’s likely to have some vacancies. When you do an exchange you have to rent the property out for a certain amount of time before you can use it yourself, but if you furnish it now and use it as an income property, eventually you can move right in and enjoy it yourself. 

New Construction

We’ve talked about Marina’s new developments and the way those properties have appreciated over the few short years they have been around, but I don’t think we’ve touched on the demand for rentals in those neighborhoods. 

There is a steady flow of high-income earners between military families, doctors and nurses, business owners, and folks relocating to the peninsula looking to rent for a whole. In addition to the new homes, we have development happening with the promenade and sports facility, and it’s all looking pretty enticing from an investors perspective. 

Plus, there is something to be said about buying a new home in regards to maintenance and repairs, and most of these homes are on small lots with low maintenance. 

Guest Units

Another consideration for me would be the ability to rent out more than one space on the property. Whether it’s an ADU or the ability to build one, a converted garage, an attached apartment, or bonus space with a separate entrance, being able to rent a property to multiple tenants is something to think about when searching for investment properties. 

I hope this info helps you evaluate your options as you consider a 1031 exchange!