West Los Angeles-based online real estate investing platform RealtyMogul has launched a 1031 concierge program, designed to offer investors a curated selection of 1031 exchange-eligible properties and hand-hold clients through the process.
“Real estate is super expensive to sell,” Stephen Haskell, vice president at RealtyMogul, said. “When you sell a piece of real estate, especially when most of our clients have held their real estate for 10, 20, 30, 40 (years), sometimes generations, you’re going to have state income tax, federal income tax, you have capital gains tax, you have something called recapture of depreciation. It could be 30% to 40% cost on your sales price that you just immediately give to Uncle Sam.”
Popular among the commercial real estate market, a 1031 exchange allows real estate investors to swap one property for another and defer capital gains taxes. It’s a way to avoid taxation by preserving assets within a family, although the property must be used for business or investment purposes only and must adhere to a series of strict IRS guidelines.
Haskell was brought in to spearhead the company’s new concierge program. He joins RealtyMogul after seven years as a senior vice president at Torrance-based Kay Properties and Investments, and before that, as an officer in the U.S. Air Force. He heavily attributes his time in the military to his ability to take risks and operate under high levels of stress.
In his new role, Haskell will oversee educating how to go about participating in a 1031 exchange and strategizing varied solutions for different types of investors – whether it be to help a client diversify their portfolio or get out of active property management.
“The biggest challenge and complexity to 1031 exchanges is finding a good property to buy in just 45 days,” he said. “Because you have escrow, you have negotiations, you have due diligence, you have third party reports, inspections, appraisals, all that, and that doesn’t even account just finding a property and touring it.”
Taking a different approach
Due to the immense complexities and potential risk of the trade-off, Haskell said it’s important to educate clients early on to avoid any possible failed exchanges.
“Really what makes us different is we like engaging with our clients months before their 1031 exchange,” Haskell said. “Because we want to educate them on all the rules of a 1031, we want to educate them on all the different asset types and classes that are available to them in real estate, and we want to educate them on the different legal structures that they could use to take ownership in that real estate – and what are the potential benefits and the risks involved in all of those – so before we even get into their escrow period, we’ve got their criteria set and their risk tolerance set, and then once they’re in escrow on the property they’re selling, that’s when we’re going shopping.”
RealtyMogul screens properties all over the U.S., of which Haskell said multifamily, self-storage, retail, industrial and medical building asset types are currently the most attractive. Office, on the other hand, is riskier.
“We have a pretty extensive due diligence program and we’re very risk averse,” Haskell said. “Most office, not all but most, isn’t going to make it through our due diligence process. And that’s part of the value that we provide to our investors.”
RealtyMogul is a vertically integrated online real estate investing platform. Since its inception in 2012, it has grown to encompass over 290,000 members with over $1.1 billion in capital invested.
