How Real Estate Agents Make Big $$ With 1031 Exchanges
That is right! We have made a tremendous amount of money helping our investors buy and sell real estate using the tax code of a 1031 exchange.
Learn FREE from us on how we built career-long relationships with a handful of real estate investors with 1031 exchanges who keep coming back for more.
You must concentrate on a Niche Market (Maybe 1031 Exchanges)
Are you new to real estate and kind of lost on what target market you are considering on targeting? Well look no further! With this strategy you can have a life long career in real estate dealing with only a handful of clients.
As mentioned in many other articles on this site like 52 Niche Markets, I believe it is imperative to FOCUS on one or two target markets.
I believe the investor market for 1031 Exchanges, is really untapped. I think too many real estate agents are afraid to go out of the comfort zone fo just listing and selling a property.
If you can get into the mindset of helping someone build their portfolio, then you can do extremely well here.
All Real Estate Agents Are Not Equal
If you have been in the industry for a bit you will realize this fairly fast. There is a big turn over for real estate agents due to lack of focus and effort. Many of them will have no clue about a 1031 Exchange which is a prime opportunity for you.
So keep reading if you are at all interested in learning more.
My First 1031 Exchange Deal
Steve, I saw your ad in the Homes and Land Magazine. It appears you deal with investors. I am looking to get creative with my portfolio to move some properties. Are you interested in meeting?
My ad was simple. A picture of my sister and I. “We specialize in helping real estate investors build their cash flow to higher levels.”
Not knowing anything about a 1031 Exchange. We were just pushing smaller single-family house and condos that brought in double-digit cap rates. This was the extent of our “specialization.”
I Have No Clue About 1031 Exchanges
Understand, when I received this call, I have heard of 1031 Exchanges but had no clue how they worked. Fortunately, this investor turned out to be a really cool guy. He has done plenty of exchanges in the past and knew exactly what to do.
So, in essence, I think I got lucky as this investor was teaching me. What he wanted from me was to seek out opportunity. No problem!
At the time, our real estate market was softening in Southwest Florida. The investor had a bunch of vacant lots that he decided not to develop. Rather, he wanted to start selling them off in order to purchase income-producing real estate.
So things were a bit tricky. He wanted to do what is called a Direct Exchange. Basically “You buy my property and I will buy yours on the same day close.”
However, who in their right mind would give up income property for raw land? No one.
We got creative and figured we would offer a partial trade. So here is how it looked. We found a 4 unit complex for $400,000. We offered to buy it if the seller would buy my clients 6 lots for $80,000 with a simultaneous closing.
It worked!! The seller of the income property didn’t want to deal with tenants any longer so he cashed out (before expenses) $320k plus 6 lots. My guy got $80k from the lots to use toward the down payment of the income property.
Everyone wins and my guy deferred taxes of almost $60k from the lots on the transaction. PS – Me and the other Realtor got paid 3% on each side. So we each made $14,400.
Creativity Wins In Performing Exchanges
Now it took me a lot of cold calling other real estate agents to make that first deal happen. It also took a lot of explanation but many still didn’t seem to understand the concept (Per my remarks above).
I imagine you will not do many “direct exchanges” but this is a way to create sales in a flat or down market. We did over $12MM in direct exchanges so far. They can be done. You just have to be creative and persistent.
The Investors Knows, Right?
I encourage you to really understand that many real estate investors do not understand 1031 Exchanges. They have many misconceptions about how they work, the cost and the complications associated with them.
You will find tens of thousands of smaller investors who never have done one who would be open to it if presented in the right light.
You Need To Educate Them
Once you understand the basics and get the appropriate QI (Qualified Intermediary) on your team, then you can really start pushing your marketing.
You will want to have a basic understanding in order to conversate with the investor and what you can do for them. Remember, this is ALL about them and helping them.
Educate & Gain Trust with 1031 Exchanges
Once you educate the investor and gain their trust you will be their “real estate consultant” forever! Assuming you are honest, ethical and a hard worker.
Once you are able to help them build their portfolio, tax-deferred and expedite growth, they will listen to you every time assuming you are doing your job well.
7 Steps To Start Immediately With 1031 Exchanges
- Go meet with a local QI. Have them educate you on everything pertaining to the 1031 Exchange Process. This is a person or company who will actually handle the entire process on you / your investor’s behalf. In most cases, this person is on call for conference calls, face to face meetings with our investors and even seminars we put on for Q&A. They should love to be a part of this process as you are giving them the business. If they are unwilling, then find someone else and fast.
- Develop Your Marketing Plan. This can be your main market for wealth. If this is of interest, go all in!! I would set up at least 2-3 different marketing campaigns which I will describe below.
- Develop Your Presentation. It is imperative to know what you are going to say and what questions you are going to ask. And then also be ready to respond to questions. Create an Ebook like the one below to have for them. I would also have an interview sheet that asks what properties they currently have and what their goals are. You can ask questions from this sheet once filled out in order to truly help them.
- List The Asset. You will want to list their property and market it aggressively in order to move to the next phase.
- Search Properties. Before and while the property is active on the market, it is imperative you are keeping an eye out for the next property(s) to buy into for the investor. If there really is no good option to move on to then it may not make sense to sell the asset.
- Transact. The QI will assist in most of the 1031 Exchange. You just need to keep a good schedule of the timelines. 45 days from closing to identify up to 3 properties. 180 days to close.
- Repeat. Repeat this process for the same investor over and over in the example below. Grow the portfolio larger than they ever imagined!
- Find More Investors. You can make a great living with a handful of active investors. There are also added benefits as mentioned below on how to generate consistent revenue as well.
Marketing Strategies for 1031 Exchanges
- Develop A List – Use RPR or whatever public record source you want to target market your investors. Find people who already own multiple single-family houses, apartment complexes, strip centers, apartment complexes, mobile homes parks, RV parks, etc. I suggest targeting properties you are comfortable and interested in selling.
- Cold Call – “Hello, my name is Steve and I am with Maxim Realtors. I see you own a 15 unit apartment building in Cape Coral. I wanted to find out if you had an interest in building your portfolio.”
- Mail – Mail this group above on a regular basis. I would put on a campaign to mail at least every other month. If you have successfully completed 1031 exchanges then lay it out in the mailer. “We helped our latest investor sell his 10 unit apartment complex deferring $400,000 in gains via a 1031 Exchange. He now owns a 40 units complex bringing in quadruple the income with a limited cash infusion. I’d like the opportunity to meet for lunch to talk about your real estate needs.” You can also make an example comparable with what they own with educational pictures/charts.
- Hold Seminars – You can promote these fairly simple and inexpensively with Social Media. FREE 1031 Exchange Seminar. Learn How To Defer Paying Taxes On Your Gain. Seats Limited! Let’s say you do 2 a month and secure 2 investors per seminar. That could lead to a large investor database over time.
- REI Groups – Real Estate Investment Groups are a great way to meet other like-minded investors. If your area doesn’t have one, consider creating one. You can easily do it on a Facebook group for FREE. Invite everyone on FB to join and promote within. Tell them to share the group. Hold monthly or bi-monthly meetings. Talk about 1031 exchanges, good deals on the market, have hard money lenders sponsor the meetings with food.
The Building Block Scenario
You find within the allotted 45 day period a 10 unit run down building for $450,000. You close on it within the 180 days. The buyer deferred his gain into this. The buyer used $40,000 of his funds to fix up this place and you helped him get occupancy to 100% within 12 months.
18 months later, Bill lists the 10 units building with you for $750,000 and you sell it deferring yet another gain into a 35 unit building for $1,350,000.
Based on these scenarios here, you sold Bill a combined value of: $2,750,000 (bolded above) at 3% commission = $82,500.
Pretty cool huh?
Analyze Consistently Their Real Estate Portfolio
When you have this opportunity, Bill isn’t going to be telling you what properties to look at or when to sell and or for how much. You have to keep his portfolio in front of you at all times with timelines and value.
And always seeking the replacement property to exchange into. You take on the “creator” role!
It HAS To Make Sense
If it doesn’t, don’t bother even presenting it. Your main goal is to get Bill into a better picture. A larger portfolio, making more cash flow and creating more equity.
Or Bill has other dreams of selling off and owning a farm. Listen to the client and their wants/needs.
You may be dealing with investors who purchase income-producing real estate. They already trust you so it makes sense to develop a team to handle property management for them, doesn’t it?
Let’s say you have built portfolios for 3 investors to a combined 400 doors average at $800 per month per door. If you got 10% monthly that would equate to $32,000 a month!! $384,000 per year.
Good job in reading this through! I’m not going to go into detail on how the 1031 Exchange works. However, go HERE for your FREE EBOOK or go directly to the IRS Website. It is a fairly simple process. The Ebook will give you the basic outline that you need to know. Leave everything else up to the QI to answer other questions.
Also, consider reading an in-depth book on 1031 Exchanges like the one below. After all, if this is your “expertise” then you should go all in and educate yourself to the max. Not to mention you will likely begin using your OWN expertise for your OWN investments!
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