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Jake Jones

Case Study: 1031 Exchange

CHALLENGE

In January of 2023, a former 1031 exchange client had another exchange requirement coming soon from the sale of farmland in West Texas. Previously, we exchanged his cattle ranch into a single-tenant net lease property that provided him with passive income. He initially intended to exchange into a recreational ranch in the hill country but was unable to identify a property. He called us with less than two weeks remaining in his 1031 exchange identification window and wanted to reinvest that equity into another STNL property like the one he had purchased previously.

was looking to again place his equity into another income-producing property. With our strong relationship with him as a previous client and our market connections, we worked quickly to put together a deal that would not only clear the boot but also be something he would be satisfied with.


ACTION

We extensively examined the market looking at both on, and off-market properties that would fit his roughly $1,000,000 in remaining equity. Within 48 hours, we identified 12 on-market listings, four off-market new-development properties, and three privately owned off-market properties. We negotiated each opportunity aggressively and ultimately selected three properties that were suitable. One property had a lower cap rate with a 20-year corporately guaranteed lease, the next had 10 years of the lease term with 2% annual escalations, and one had five years remaining but had the highest cap rate and the tenant had just added a new roof and fully remodeled the store showing the tenant’s commitment to the location.


RESULTS

Knowing our client went to college in Stephenville, TX, we found the developer who was in the process of rehabbing one of the largest retail centers in town, and had just finished subdividing the land underneath the freestanding Family Dollar. Within three days, we had the property under contract below replacement value for the property due to our aggressive purchase terms.

This exchange boosted his cash flow by $75,000 per year since his land was not producing any income. He now receives his rent via direct deposit on the first of every month like clockwork. He now spends more time traveling across the country to visit his three kids.

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