Where to start to 1031 into Commercial Multifamily
Hi folks. I've got an AirBnB with about $400k equity in it. It's a cashflow machine, but I'm tired of being on-call 24/7. I've just spent all morning hunting down electricians to try to deal with my power going out and take care of guests - not what I want to be doing Christmas Eve.

Frustrations aside, I'd like to 1031 this into a commercial multi. Something mostly-stabilized that is large enough for either semi- or full-time management . My question is this - where do I start? Contact brokers? Sub to costar? Public listings (loopnet) are mostly garbage from what I can tell. I'm not an RE newbie - I've done residential investing, rehab, and development - just new to the commercial space. Where do I get started as far as sourcing properties goes? I own and operate in TN/AL and am open to anywhere in the southeastern U.S.
[{"id": "hputaej", "text": "If you want to hang on to your AirBNB there are management companies who not only take care of maintenance/emergency calls but also help you plan how to best take advantage of rates/etc.", "replies": [{"id": "hpuv59k", "text": "Yeah, I don't think it's profitable using them unfortunately. The cut they take is outrageous (30-40%) and they don't optimize income very well. I'm in the hottest AirBnB market in the country and I know fellow investors who LOST money because they were with management companies. I might have another look, but I think I'd rather parlay the equity into a different type of asset. I'll probably do more BnBs, but it feels like the right time to let this one go.", "replies": [{"id": "hpv5sab", "text": "Used to work at a management company, never heard of anyone charging that. Quite absurd. Almost everyone I know of charges around 7-8%", "replies": [{"id": "hpv62hu", "text": "Short term rentals are different from LTRs, unless that's what you mean. I'm in the Gatlinburg area and the lowest fee I found was 25%. 30%+ is not unheard of. It's robbery. Hence why you can't really be profitable using them.", "replies": [{"id": "hpvyvu5", "text": "The heck? Someone start a management company undercutting all these guys out there charging that much.    That's insane.", "replies": [{"id": "hpw0gu1", "text": "Yeah it's insane. The whole market up there is completely nuts. And the service levels... leave a lot to be desired. There are literally only two companies in the whole county that sell bear boxes and neither of them pick up the phone. You could literally just hire a phone operator and be the top company in the area.\n\nI did *briefly* consider doing what you suggest, but property management is not my forte. I don't have the patience for it lol. You should see the portfolios of some of these guys. Smoky Mtn Rentals manages like 5000+ cabins. Everyone is making a killing but the owners!", "replies": [], "depth": 6}, {"id": "hpynjyz", "text": "I will invest", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "hpvpf0j", "text": "I\u2019m also curious if this was a prop management company for STRs or LTRs. I\u2019ve never seen one for STRs that low (but like OP, I\u2019m in a hot Airbnb market).", "replies": [{"id": "hpw0u7a", "text": "Yeah it's STRs, way higher rates. My LTRs are what you'd expect - 8% or so", "replies": [], "depth": 5}], "depth": 4}, {"id": "hpvrr1l", "text": "I work primarily with larger institutional quality multifamily projects and I usually only pay 3-4% EGI for management.", "replies": [{"id": "hpw0rm1", "text": "Yeah I'm specifically talking STR management. Totally different pricing. They gouge the hell out of you. I guess their justification is higher turnover, but you can automate 90% of it, so it isn't really justified.", "replies": [], "depth": 5}], "depth": 4}, {"id": "hpxtpk1", "text": "&gt; Quite absurd. Almost everyone I know of charges around 7-8%\n\nI can't even find a PM for 7-8% on a long term rental portfolio.  They are all 7% + maintenance markup + leasing fees.  \n \nYou aren't even going to find manage fees of double that for Airbnb.  Maybe 20-30% on the low end.", "replies": [{"id": "hpyn71b", "text": "Looked into it seems like a lot of cos charging between 25-30% on the short term rental side. I did find a company that says they charge 10%. I'm not sure if that 10% is real for short term rentals but I found a few. I'm more familiar with long term residential/multifamily pm's. In anycase fees are usually negotiable especially with local management companies. Maybe op should switch to a longterm lease tenant and use asset depletion for down payment and keep that rental cashflowing and may be able to use that cash flow for a bigger aquisition loan. If op just truly wants to be passive though why not find a local syndicator or developer and let them make the money in a jv.", "replies": [{"id": "hpz3nsq", "text": "&gt; Maybe op should switch to a longterm lease tenant and use asset depletion for down payment and keep that rental cashflowing and may be able to use that cash flow for a bigger aquisition loan. If\n\nMany Airbnb are barely viable as long term rentals.  It's a question on whether the numbers make sense.", "replies": [], "depth": 6}, {"id": "hq5gdpf", "text": "&gt;Maybe op should switch to a longterm lease tenant and use asset depletion for down payment and keep that rental cashflowing and may be able to use that cash flow for a bigger aquisition loan. If\n\nThis market is purely STR. Nobody lives in these cabins as long-term rentals, and the rents wouldn't support the mortgage anyways. It's purely a transient vacation market, so unfortunately this isn't an option.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "hpvindt", "text": "Hmmmm.....didn't realize they were that high.  You're right that isn't sustainable.", "replies": [], "depth": 3}, {"id": "hpxozdy", "text": "Just a thought but anything you 1031 into a multifam is going to be more work that a \u201csingle tenant\u201d Airbnb. I tend to agree that full time management is the way to go. Even though I\u2019m a broker my property management team wanted like 30-40% of cash flows to manage a small public storage site I was buying. Here\u2019s a suggestion I am making to all my 1031 clients that are retiring\u2026 multi tenant industrial and flex. You only have to manage a handful of tenants AND the maintenance costs are virtually non existent compared to tenants that actually reside in the property. Plus, if you have them on a NNN lease, maintenance just becomes part of their responsibility. It\u2019s a much cleaner operation for retirement or hands off management. I am happy to shop you area for properties for you. I\u2019m part of a national team and would be happy to refer you. DMing you.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hpuw78o", "text": "Search the sub, this gets asked often.", "replies": [{"id": "hpv16x1", "text": "I have, but Reddit's search function is famously bad. This forum also gets quite a few folks looking to 'get started' from the brokerage side of things - I'm looking for advice on the investment side.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hpuxu72", "text": "Get a commercial broker. This is the bread and butter of commercial brokerage.", "replies": [{"id": "hpuzbr1", "text": "So, is it prefarable to try to find a local (regional) or go with a big name like CBRE? Also, in the residential space it tends to be bad form to work with multiple agents simultaneously - is that the same in commercial? I assume multiple brokerages are going to have different pipelines since the deal structures are different.", "replies": [{"id": "hpv1e8q", "text": "Big houses like JLL or CBRE really only make sense for someone (or an organization) that needs enterprise level support. At your price point and likely not doing a large quantity of transactions, a local brokerage is definitely the way to go.\n\nIt is bad form to work with multiple agents, yes. This is especially true in a 1031 exchange, where your agent is likely to be working on suitable target properties before closing. While it's true that you may get an occasional pocket listing from a specific brokerage that wouldn't be available elsewhere, it's also the case that commercial brokers talk more 'off market' than residential agents do.", "replies": [{"id": "hpv1ldi", "text": "Awesome, that's helpful. Thank you", "replies": [], "depth": 4}], "depth": 3}, {"id": "hpvfoa8", "text": "At 400K you won't have enough equity to float their costs and get your squeeze.\n\nYou'll be managing this yourself for a few years.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hpv29uy", "text": "$400k of equity won't be enough to purchase a large enough property for full time staff. Have you thought about syndicating?  Raise the rest of the capital and go large enough for at least a staff of 4 (2 in 2 out).  This size or larger is where you stop dealing with tenants. We stopped buying anything smaller.", "replies": [{"id": "hpv6s4l", "text": "I have considered syndication, although I don't have the time to act as GP for a project of that size. I'm also doing land development and I'd like to really focus my attention there 2022. I do have a partner that would be interested in that, I should reach out to him. Thanks for the idea!", "replies": [{"id": "hpv7na6", "text": "Best of luck!  Have a great holiday.", "replies": [], "depth": 3}, {"id": "hpweday", "text": "Idk if this is of interest but I just exchanged from one sfr into three separate mfrs, total 12 units, and very reasonable PM (6%).   Conforming loans. \n\nMy equity plus some added cash was right around your number.", "replies": [{"id": "hqal47j", "text": "Yeah this is exactly the sort of thing I'd be looking for. How did you secure this deal?", "replies": [{"id": "hqasty1", "text": "What do you mean by secure? They are conforming loans so they are secured by themselves as real property and the rent assessment from the appraiser counts toward income.", "replies": [{"id": "hqava1g", "text": "Sorry, I didn't mean 'secure' in the technical sense. How'd you find this deal? Pocket listing? Broker? etc. I meant in layman's terms, hah", "replies": [{"id": "hqay6cz", "text": "Oh i see.  Once I got comfortable with out of state as an idea, I looked across the us until I found good mfh options and then I looked from the customer side, ie pretending I was renting and looking for property managers who answered the phone, had nice pics etc.  i called and asked them what their pricing was and then looked at roi using those numbers. \n\nOnce i found a target area I had my local agent refer me to someone there which was good because she was amazing right off the bat. But it sucked a little because I found out later that my local agent got a kickback on her commissions so she was hustling and didn\u2019t get to keep as much of the money as I expected. \n\nBut anyway.  I started with stuff just found on redfin/mls and the agent found me pre market and day one stuff and knew how to aggressively get me in contract. \n\nI sold my exchange home and got into the exchange.  I paid earnest and inspection etc out of pocket and then the rest was done at close. \n\nI offered on/got in contract with about 6 or so properties, inspected 4, closed on 3.", "replies": [{"id": "hqb3e33", "text": "Gotcha, sounds like bread and butter residential. I've done that before (only exchanged SFRs for SFRs though). Still, familiar with that process. Regardless, thank you for taking the time to type out a thoughtful response. Sounds like you got yourself a wicked deal.", "replies": [], "depth": 8}], "depth": 7}, {"id": "hqaz5uh", "text": "Like literally most of my work is done with google, redfin, and excel. \n\nI do pay for rentometer too but that\u2019s about the only special thing. \n\nI will give you an extraordinarily good piece of advice if you are new to this:  approach this as a people manager NOT A CUSTOMER.   Being a customer is how you get lost, confused, mislead, how you frustrate professionals and end up with shysters.   A people manager understands everyones skills and motivations and effectively coordinates them.  Its not hard but it is a mindset.", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "hpxtijw", "text": "The total capital for the size of acquisition is why I\u2019m working on a syndication. My partner and I are doing a 66 unit, small enough to keep some larger players away, but large enough we can still manage decently without killing the cash flow. If you are looking to not have the headache, would always look at being an LP on a deal, or depending on deal size, many would take 1031 dollars as well. Depending where you are or are looking, I might even know a few operators I could connect you with to see if you would mesh or not.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hpv9rig", "text": "If not already on a paid LoopNet account, make sure to upgrade so you can actually view all listings. Unless an agent pays additional to promote the listing, there\u2019s a good chance you won\u2019t see it on a non paid account. Also, try Crexi and sort by new (they have a ton of old/expired listings).", "replies": [], "depth": 1}, {"id": "hpvvat6", "text": "I\u2019m not in your market/state, but here in Southern California I\u2019ve been working with a broker that specializes in 1031 exchanges. He\u2019s amazing. He knows the ins and outs of each market and sub market, with the added benefit of intimately understanding the nuances of the 1031 exchange. \n\nIf you can find a brokerage that specializes in 1031 exchanges around your market, I don\u2019t think you\u2019ll be disappointed.", "replies": [{"id": "hpxihhb", "text": "What broker", "replies": [], "depth": 2}], "depth": 1}, {"id": "hpvwhlq", "text": "What\u2019s the total value of the property? I would look for a TIC arrangement you can exchange into with the other TIC being owned by the managment company.\n\nJust be careful with how much the fees ( managment fees, aquisition fees, the waterfall if the property sells etc) that the managment company charges.", "replies": [{"id": "hpw1jdb", "text": "Total value is probably around $750k. How would I find someone who doe these sorts of deals? Just skimmed a few articles on it and it seems promising.", "replies": [{"id": "hpw2chi", "text": "It\u2019s crazy but networking is your best bet. I work at a consulting/accounting firm and have had a bunch of clients in your shoes that we introduce to other real estate clients.  They pitch their properties/terms and the client would choose which deal/who they like.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hpvz36s", "text": "If you want to go hands free, try a DST operator.  Some will have institutional class Multifamily.  Its a mail box money arrangement and the operator takes meaningful fees.  The yields are modest, but they are basically set up for 1031.", "replies": [{"id": "hpw10ha", "text": "Huh, this isn't something I'd heard of before. I'll have a look - thanks!", "replies": [], "depth": 2}, {"id": "hpx23e8", "text": "DSTs are a bit more difficult to get financing on. Typical multifamily syndicators can include you in a deal as 1031 money as part of a TIC structure", "replies": [], "depth": 2}], "depth": 1}, {"id": "hpw2i4r", "text": "Reach out to all the major brokers that specialize in your desired product type. Ask them to add you to their principal email list. Make it known that you\u2019ll use them for your representation. Stay true to your word and you\u2019ll slowly start to get a lot of quality offerings!", "replies": [], "depth": 1}, {"id": "hpwdi4s", "text": "At my old REPE shop we would have 1031 investors with different size requirements buy into our deals and arrange a TIC between our various capital vehicles with 1031 needs and the investor(s) who\u2019s timelines and target exposure aligned. It\u2019s a pretty sizable space so I\u2019m quite confident you can find numerous shops that will do this that offer a variety of deal sizes, types, and locations. I would look into this. Hands off. we would buy most things all cash, semi stabilized. Most deals we pursued for a similar box: refinance out a majority of the capital after a 2-3 year stabilization during which it makes minimum distributions (think 3-6%) and then have a strong double digit levered return for the rest of the capital that stays in the deal. Though, I was on the deal team there and so I only looked at deal level economics. Capital markets team assuredly has a better idea of what our investors made/paid.", "replies": [], "depth": 1}, {"id": "hpxxefb", "text": "Just fair warning, apartments will be easier for sure, but you sound like you are fed up dealing with people. Multi-family might not be for you compared to something like a NNN.", "replies": [{"id": "hq5jc6k", "text": "Mainly I'm fed up with non-stop repairs and being on call. People are hard on these STRs. For example, this past month, I had weather stripping around my windows fail in the hurricanes, a water filtration unit fail and need to be replaced, and the main power line fail. It has been a very expensive month with nonstop issues. It is also the second Christmas in a row I spent troubleshooting problems. I want a damn break.", "replies": [{"id": "hq62gg6", "text": "Time to look into that NNN then. All tenant responsibility, they don\u2019t even ever call you", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hq5c52a", "text": "If you don't mind me asking, how do you manage your check-ins an check-outs for your Airbnb? \n\nI see that as a major headache for some people so just asking to see if it's the same for you.", "replies": [{"id": "hqadl3h", "text": "That's actually the easy part to be honest. I use pricelabs to automate pricing - I check the base price once a week, but otherwise the day-to-day modifications are handled automatically. All messaging (check-in, check-out, review, etc) is all handled automatically through hospitable (formerly smartbnb). Coordination with cleaners is handled through that app as well. All of that stuff is easy.\n\nThe annoying/challenging part is when guests are calling you at 2AM Friday because they can't figure out the washing machine. Or they've broken a chair and you've got to figure out how to replace it but the property is two states over. Or the breaker has a faulty switch and there's no power and it's 10 degrees and it's Christmas Eve and you've got to try to find the only on-call electrician in the county.\n\nYou know, the fun stuff ;)", "replies": [], "depth": 2}], "depth": 1}, {"id": "hqa60ym", "text": "It's best to reach out to investment brokers that in the areas you want to buy in. Loopnet is mostly worthless. If you have a specific property in mind, then CoStar would be the best way to find the owner's contact information.", "replies": [{"id": "hqahay6", "text": "Sounds good, thank you", "replies": [], "depth": 2}], "depth": 1}]