The Problem: Tom & Julie had owned their 87 unit apartment building in Nob Hill for over 40 years. This was the crown jewel in their real estate portfolio and was purchased to provide them with cash flow when they both retired. Years later and due to some family health issues, managing the property had become progressively more difficult for them. Vacancies and expenses had increased, while their net income had dropped. They were looking for a solution that would eliminate their management headaches, provide them more cash flow…and most importantly, give them back more time (the one thing money can’t buy).
The Solution: Tom & Julie (the sellers) sought out experts in the industry, and decided to interview and ultimately hire the Colliers International San Francisco Multifamily team (the Colliers team), for their expertise in selling nearly 80% of the larger trophy apartment buildings in San Francisco. The Colliers team met with Tom & Julie, and asked a number of pointed questions to better understand their situation. The Colliers team presented a proposal with a solution that involved selling their 87 unit apartment building, in a very short time frame (45 days), which allowed the sellers to save over $1.3 million in transfer taxes. After the sale was completed, the Colliers team worked with the sellers in researching, presenting multiple options, negotiating and ultimately coordinating a 1031 tax deferred exchange, which also saved the sellers millions of dollars in capital gains taxes.
The End Result: Tom & Julie went from owning one large property in San Francisco that was 25% vacant with declining rents and increasing expenses, to owning four (4) properties that were geographically diversified, non-rent controlled, professionally managed and their net income increased from $423,232 per year to $1,123,235 (over 165%). Goals accomplished – Geographic Diversification, No Rent Control, No More Management Headaches and More Cash Flow.
|Client Needs||TIC & DST Solutions|
|Defer Capital Gains Tax 1031 Exchange||1031 Exchange|
|Eliminate Management||TIC & DST Investments in 4 Newer Garden Style Apartments|
|Increase Cash Flow||+165% increase in NOI|
|Predictable & Reliable Income Stream||Institutional Quality Real Estate with Professional Management and Monthly Cash Flow|
|Diversification||Traded a single “rent controlled/management intensive asset with a low return on equity” into four (4) newer garden style apartment buildings in four different geographic locations that are professionally managed, require no management and offer substantially more cash flow|
|Tax Benefits||By finding the right buyer who could close on the sale of the sellers 87 units in 45 days before the end of 2020, we saved the seller $1.3M in transfer taxes …while saving the sellers millions in capital gains taxes by helping them with a 1031 exchange.|
|Park Money (Land Bank)|
|Value-add Investment||The four (4) properties the sellers traded into offered substantially value add potential and growth in rental income.|
|Estate Planning||The four (4) properties the sellers traded into will be easy to transfer and will require no management by their heirs.|