Finding experienced 1031 exchange realtors and Real Estate Agents can be challenging. While many Agents might be willing to take on a new role and help represent you on a 1031 transaction, it is extremely crucial that they have handled other 1031 transactions previously. The rules in a 1031 exchange are different than a typical residential or commercial property purchase and need to be followed carefully.
At JSG Realty and 1031exchange.com, we only allow specific 1031 exchange realtors and real estate agents to work on these types on negotiations.
In a 1031 exchange, the transaction requires a series of very important steps that need to be followed to defer the capital gains tax, as stated in section 1031 of the IRS (Internal Revenue Service) code.
The purpose of the 1031 is to allow the exchange client to swap out property to continue their investment within the real estate sphere by incentivizing the property seller with a very specific tax deferment.
1031 Exchange Realtors and Real Estate Agents – Providing the Following
- Education on the 1031 exchange process – Understanding the timeframe and rules that accompany a 1031 exchange is critical. The 1031 Broker should provide as much knowledge as possible. The relinquisher has 45 days to identify a replacement property following the sale of their original property. This is not a lot of time and the deadline can approach sooner than expected.
- Advisement on potential investment purchases from the relinquished funds – Education on the types of properties that can be purchased, including single family, multi-family, residential, commercial, triple net investments and land. Each category of investment property has advantages and disadvantages. The investor must decide the type of purchase they prefer, as this holding will potentially be in their portfolio for a lengthy period of time. There is not right or wrong with regard to type of property selected. Its a matter of comfortably and preference for the buyer.
- Assistance and negotiation on 1031 purchase – A 1031 exchange buyer can hold leverage for a real estate transaction, especially if it is an all cash purchase. It is the Brokers job to negotiate the best deal possible for a 1031 client. A seller or sellers broker will typically have their ears perk up once they hear their is a potential 1031 exchange buyer on the table. This is a valuable commodity and one that should not be taken lightly for either party. Providing 1031 exchange services and expertise is all part of the process
- Introduction to 1031 intermediaries or experienced attorneys – Experienced 1031 exchange realtors and Real Estate Agents should have a wide rolodex of contacts to assist with a 1031 exchange. If necessary, your Broker should introduce you to a reputable exchange intermediator or attorney. These vendors should be within the grasp of any experienced real estate vendor in the industry. However, make sure the 1031 qualified intermediary is knowledgeable and has a number of 1031 exchange transactions in their resume. Experience is key and can be vital in securing the transaction.
The 1031 exchange is unique because it helps the seller defer a capital gains tax by purchasing a replacement property. Since many 1031 buyers work in careers outside of the real estate industry. They need expertise and guidance in the real estate field to help with this special transaction. Over the years, JSG Realty has worked with businessmen, restaurateurs, families with large estates and other categories of clients that work outside of the real estate helm. They deserve the utmost fiduciary responsibility and care with regard to this transaction from any and all 1031 Exchange Realtors and Real Estate Agents.
1031 Exchange Challenges
Unfortunately, we have found that many 1031 exchange buyers lapse on the time requirements and are left scrambling at the very end to identify a property that fits their needs. This is a part of the process that we try strongly to avoid. Continuing to wait for that perfect property can be a blessing and a curse. The ideal property typically doesn’t exist and the 1031 client is best to choose an investment that comes close to their desired needs.
Additionally, we have founds that attractive investment properties typically sell fast. If a buyer is hesitant and holds back for a different property, they may lose the initial investment of interest. As 1031 exchange realtors and real estate agents, we advise our clients to carefully consider properties that may be found at the beginning of the search and not simply the end.
Savvy 1031 Exchange Realtors and Real Estate Agents should help their clients create a spreadsheet or some other form of categorization to stay organized with all potential property opportunities. Deals come fast and furious. It can become overwhelming and following a methodical process will help evaluate each potential 1031 exchange transaction. Remember, it is the job of 1031 exchange realtors and real estate agents to continuously send property options to the client. Of course, the goal is to select quality content and not simply quantity. However, some investors may find certain properties attractive, while others do not.
JSG Realty 1031 Process
At JSG Realty, we sit down with all 1031 exchange clients to discuss their investment goals, desired rates of return and interest in being an active participant in managing the property. Some holdings require active property management, while others are very easy to maintain.
In certain circumstances, we have held FaceTime or Skype meetings for are clients that reside in different parts of the Country. We educate all of our 1031 exchange realtors and real estate agents to be knowledgeable in the technology world.
After an initial client meeting or in some circumstances a series of discussions, our 1031 exchange realtors and real estate agents begin to review specific properties that may fit the clients needs. Geography plays an important part of the search process, as some investors are determined to purchase in a specific state, region or part of the country.
Additionally, we have also developed a process for our 1031 exchange clients sending us properties they may discover on their own. With our technology and experienced team of 1031 exchange realtors and real estate agents, we review all properties, investigate background information that may not be available to the public and advise our clients as to whether the property sent is an intriguing investment.
- Triple Net Lease Properties – A NNN investment is a lease in which the tenant pays the taxes, insurance and CAM (Common Area Maintenance) on the property. It creates a very easy ownership for the purchaser
- Multi-Family residential – These buildings have several different Apartments. This allows for a diversity of tenants and greater rentroll. These types of properties may include property management experience
- Mixed Use Holdings – This includes a combination of residential and commercial tenants. Often times, there may be a retail tenant with a number of residential Apartments above. This allows the property owner to diversify in this example
- Single family homes or Apartments – Individual units or single home purchases are easy to manage. They can offer appreciation. Depending on the tax amount, they may or may not generate a high rate of return or cash flow
- Land – Some of our 1031 exchange buyers prefer to swap their relinquished property for land. They are advocates of land appreciation and aim to sell a specific parcel of property once the value increases in the future. We have setup an entire team of 1031 exchange realtors and real estate agents to scour the marketplace for land opportunities
JSG Realty 1031 Exchange Services & Next Steps
During the past several years, our firm has been involved in a wide array of 1031 exchange transactions. We have sold single family homes, triple net properties and multi-family buildings. Each dedicated buyer we have worked with has been very satisfied with their results. JSG Realty is always available to assist, answer questions or help with property management issues. If a tenant vacates, we will rent the property as quickly as possible to a new tenant. Our first and foremost priority is the satisfaction of our 1031 exchange clients. Our firm has been in business for many years and we strive to create long term relationships moving forward.
As experienced 1031 exchange realtors and real estate agents, we are extremely bullish on real estate in general. With extensive knowledge of the industry for many years, we have seen the real estate booms and busts come and go. There is a lot of money to be made in real estate. With the right property chosen by the appropriate team of 1031 exchange realtors and real estate agents, your investment purchase will produce great cash flow for many years to come.