A 1031 Exchange, what is it? On a weekly basis, the Champions DFW Commercial Realty Radio Show and Podcast explain a different aspect of commercial real estate. In this episode, Jim Kelley of Champions DFW welcomes Boone Nerren, the President of AMZ Equity Partners, LLC in Dallas. This is an excerpt of their conversation…
Jim: Tell us about the 1031 exchange program, and give us a quick summary for our listeners and how you help clients invest.
Boone: The 1031 exchange has become more and more important and more and more well known just from the roots of it. It got its name just like the 1040 tax return. It’s an IRS form, a 1031. So it’s used for IRS tax purposes to be able to take a property that you’re selling, an investment property, and then exchange it for what they call a like kind exchange, meaning going back into a similar styled real estate property. Now, the like kind exchange and like kind definition has a very broad application which is great for investors because one of the first questions we often get is, “Well, what works? What qualifies? What can I sell, and then what can I buy and be able to take advantage of the tax deferment of the 1031 exchange?” And the good thing for your listeners to know is that there’s a broad definition by the IRS on what qualifies as a like kind or similar kind exchange.
Jim: So it gives the seller of a property great deal of flexibility when they’re reinvesting?
Boone: Absolutely. A lot of investors today, you look at the market as something that a lot have seen. We went through the five, six years of pretty slow investment times from ’08 till 2013, 2014 depending on the type of property and the segment it was in on when that part of the sector began to really recover. So there are a lot of people now who had land, who had properties that were at a valuation that was not attractive to them to sell. Now it is. Now there’s equity in these things. Now it may be at a point to where the additional equity growth is probably going to be minimal for a while, and there’s a great opportunity for people to go ahead and capture that equity and that profit and then roll that over into another investment that’s larger that allows them to compound those profits and grow that investment dollar tax free… tax deferred.
Jim: What kinds of returns are you seeing in some of your projects and investments?
Boone: This market is in an exceptional growth curve that we rarely see in this market. So annually we’re seeing double-digit returns on equity capture. We all know it won’t last forever, but we do know that there’s an enormous amount of additional growth. There are 1,000 people a day moving into the Dallas/Fort Worth area. You talked about others who are expanding their operations, who are growing their employment base even at 100, 150. We can all look in the business pages and see Toyota and Liberty Mutual, State Farm, and other large national and international companies that are expanding their employee base and moving here to Dallas. But there are a number of 100 and 200 and 500 employee growth models that are going on that are driving everything from residential to commercial. People got to move somewhere. Not everyone’s going to move into a $1,500 apartment, so a lot of times the B and C class apartments are great investment opportunity for your market and for our listers.
Listen to the entire 1031 exchange investment conversation between Jim Kelley and Boone Nerren. Ron Taylor hosts the radio show on 620 AM KEXB in the DFW area. The podcast is below. Also, find the complete list of podcasts on iTunes—here.
Learn more about Jim Kelley, here.
New Property for Lease
Champions DFW has a new property for lease. It’s a medical office space and totals a little more than 2,000 square feet in Keller. It’s move-in ready, has building/monument signage and is located near the Keller Parkway and Rufe Snow. Get all of the details from Eric Goodwin, here.