Transaction Story · 1031 Exchange · Long Beach, CA
How a Long Beach Investor Turned Nine Aging Buildings Into 378 Units of Passive Income
Nine Long Beach Buildings.
Forty Years of Equity. Three Strategic Exchanges.
A Long Beach investor had owned nine apartment buildings for almost 40 years. The majority were older structures with small units in original condition, requiring substantial ongoing repairs, maintenance, and hands-on management. Rather than a single liquidation event, Stepp Commercial orchestrated a three-transaction exchange sequence — moving the investor from 106 aging Long Beach units into 378 institutional-quality units generating passive income across California, with 100% of capital gains deferred throughout.
Properties Sold
Exited
Acquired
Increase
Aging Stock. Rising Costs.
A Portfolio That Needed a Plan.
After nearly four decades, the Long Beach portfolio faced a convergence of challenges that made holding increasingly difficult. The buildings required significant capital investment to modernize, California's regulatory environment was tightening, and the investor was ready to shift from active landlord to passive income recipient.
Of ownership across nine Long Beach buildings, most in original condition with aging systems and small unit sizes.
Major capital investment required to upgrade electrical, plumbing, and unit interiors across the entire portfolio.
Daily tenant calls, maintenance coordination, and management burden across nine separate properties in multiple locations.
Average cap rate on the Long Beach downleg — compressed returns relative to the capital required to maintain the assets.
Capital gains deferred across all three transactions through 1031 exchange structuring by Stepp Commercial.
Long Beach equity repositioned into institutional assets across Bakersfield and Fresno, diversifying across California markets.
Cap Rate Comparison
Downleg vs Upleg across all three transactions
Unit Count Growth
Units sold per transaction vs units acquired
Six Long Beach Properties
to Sablewood Gardens, Bakersfield
The first transaction sold six properties from the portfolio at a 3.79% cap rate and exchanged into a brand-new 152-unit construction asset in Bakersfield. Net operating income increased by over 50% from day one — with zero management responsibilities from closing day forward.
6 Properties Sold
Sablewood Gardens
2600 Sablewood Drive — New construction, institutional quality, professionally managed from day one.
Transaction 1 — NOI Before vs After
Annual net operating income at exchange close
Two More Properties
to Lotus Villas, Bakersfield
In the second transaction, two additional Long Beach properties were sold at a 3.77% cap rate and the proceeds exchanged into Lotus Villas, a 68-unit property in Bakersfield. The investor's property value doubled on this transaction alone, with net operating income growing by nearly 40%.
2 Properties Sold
Lotus Villas
10720 Brimhall Road — Property value doubled. NOI increased by nearly 40% on closing day.
Value Doubling Effect
Property value before vs after exchange
NOI Growth
Annual net operating income comparison
The Final Property
to Two Fresno Assets
The final Long Beach property was sold for $6.2M at a 3.18% cap rate and exchanged into two properties in Fresno totaling 158 units. Unit count jumped from 21 to 158 in a single closing, with net operating income increasing by over 40%.
Final Property
2 Fresno Properties
NOI Before vs After
Transaction 3 income comparison
Unit Count Jump
21 units sold → 158 units acquired
The Full Picture
Across three carefully sequenced transactions over multiple months, Stepp Commercial moved a Long Beach investor from 106 aging units requiring constant attention into 378 institutional-quality units generating passive income across California, with 100% of capital gains deferred throughout.
NOI Across All Three Transactions
Long Beach downleg vs California upleg, by transaction
Cap Rate Progression
From compressed Long Beach cap rates to stronger California yields
Long Beach
9 aging properties, original condition, high daily management burden
Income Increase
Delivered from day one of the final exchange closing, with zero capital gains paid
Across California
New construction and institutional assets, fully professionally managed
Completed
Exchanged
Paid
Protected
| Transaction | Downleg Units | Downleg Cap Rate | Upleg Units | Upleg Cap Rate | NOI Change |
|---|---|---|---|---|---|
| TX 1 — Sablewood | 61 | 3.79% | 152 | 5.70% | +56% |
| TX 2 — Lotus Villas | 24 | 3.77% | 68 | 5.57% | +39% |
| TX 3 — Fresno | 21 | 3.18% | 158 | 6.18% | +41% |
| Total | 106 | avg 3.58% | 378 | avg 5.82% | +50%+ |
"Not only were all of the financial goals met or exceeded, but we also achieved the strategic goal of moving into larger properties that were less management intensive. Stepp Commercial presented a plan to leverage my equity into assets that were not only newer and larger, but significantly increased both the value of the portfolio and associated cash flow. This required precise coordination, experience and timing over several months with a lot of moving parts and several escrows."
Long Beach Investor · Private Multifamily OwnerInstitutional Quality.
Strong Yields. Zero Management.
The two Fresno replacement properties represent the kind of institutional-grade assets that are simply out of reach when purchasing individually. Combined, they added 158 units and dramatically higher net operating income from day one.
Handled Start to Finish
by Stepp Commercial
Robert and Todd's expertise ensured the exchange of 106 units into 378 units was seamless across several months of coordinated closings. Multiple escrows ran simultaneously, with precise timing required at every step to protect the investor's 1031 exchange windows.
Ready to Explore Your Exchange Options?
Stepp Commercial has completed over 100 exchanges for California multifamily investors. One conversation is all it takes to understand what your portfolio could look like on the other side.
Get a Free Portfolio Review1.866.99.STEPP · [email protected] · CA Brokerage License No. 02325250