Introduction: In November 2022, a land broker approached Landan Dory, a real estate professional, with a client who was selling off a large tract of farmland. The landowner was looking to use the funds to purchase a ranch and minimize their tax exposure on the sale. Landan and his team got involved and introduced the landowner to net lease properties and how they could use a 1031 exchange to purchase a single-tenant, net-leased (STNL) property using the proceeds from the sale. This case study outlines how Landan's team helped the landowner minimize their tax exposure and invest in a profitable net lease property.
Challenge: The landowner was facing a significant tax bill from the sale of their farmland, which they wanted to minimize. They also wanted to use the proceeds from the sale to purchase a ranch. Landan and his team had to find a way to help the landowner minimize their tax exposure while providing them with a viable investment opportunity.
Action: Landan and his team began by educating the landowner about net lease properties and the benefits of a 1031 exchange. They showed the landowner how they could sell and roll 100% of their equity into a property that is corporately operated and generates cash flow from day one. The team then helped the landowner to identify potential net lease properties that would meet their investment objectives.
After careful analysis, the team orchestrated an exchange and helped the landowner purchase a 15-year NNN Take 5 Oil property with a 6.5% cap rate return in Round Rock, Texas. The property is corporately operated, which means that the tenant is responsible for all property-related expenses, including taxes, insurance, and maintenance. This makes it a passive investment for the landowner.
Results: By working with Landan and his team, the landowner was able to minimize their tax exposure and invest in a profitable net lease property. The team helped the landowner to identify a property with a 6.5% cap rate return, which is higher than the average for net lease properties. Round Rock, Texas, where the property is located, is one of the fastest-growing markets in the US, which suggests that the investment is well-positioned for growth.
Furthermore, the landowner was able to achieve their objective of purchasing a ranch. The profits generated from the net lease property provided them with the funds they needed to purchase the ranch without having to worry about their tax exposure.
Conclusion: This case study highlights how Landan and his team helped a landowner minimize their tax exposure and invest in a profitable net lease property. By leveraging a 1031 exchange, the landowner was able to roll their equity into a property that generates cash flow from day one, providing them with a passive investment opportunity. The team's careful analysis and selection of a property in a fast-growing market ensured that the landowner had a viable long-term investment. Overall, the case study showcases how a 1031 exchange can be an effective strategy for minimizing tax exposure and investing in a profitable net lease property.
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