STR to STR: Can You 1031 Exchange Between Vacation Rentals?

## The Short Answer: Yes One of the most common questions we get from STR investors is whether they can exchange one vacation rental for another. The good news: absolutely yes. ## Understanding "Like-Kind" The term "like-kind" confuses many investors. They assume it means identical types of property. In reality, for real estate, like-kind is broadly interpreted: - A condo can be exchanged for a single-family home - A vacation rental can be exchanged for an apartment building - Raw land can be exchanged for commercial property - An Airbnb in Florida can be exchanged for one in Colorado **The key requirement is that both properties are held for investment or business purposes.** ## STR-Specific Considerations ### Proving Investment Intent The IRS wants to see that your STR is truly an investment, not a personal vacation home. Strengthen your position by: - Renting the property consistently (not just a few weeks per year) - Limiting personal use to 14 days or 10% of rental days - Treating it as a business (separate accounts, professional management) - Reporting all income and expenses on Schedule E ### Mixed-Use Properties If you use your STR personally, be careful. The IRS may scrutinize exchanges involving properties with significant personal use. Work with a tax advisor to ensure compliance. ## Popular STR-to-STR Exchange Scenarios 1. **Market Upgrade** - Sell a starter STR, buy in a higher-performing market 2. **Portfolio Expansion** - Sell one high-value STR, buy two or three lower-priced units 3. **Geographic Shift** - Move your investment closer to home or to emerging markets 4. **Property Type Change** - Swap a condo for a cabin, or vice versa ## Making It Work The mechanics are the same as any 1031 exchange: 1. Use a Qualified Intermediary 2. Meet the 45-day and 180-day deadlines 3. Reinvest all proceeds to defer all gains 4. Acquire replacement property of equal or greater value STR-to-STR exchanges are not only possible—they're one of the most powerful tools for building a vacation rental portfolio.