CONSULTING & ADVISORY + INVESTMENT PROPERTY PORTFOLIO ANALYSIS (IPPA) + 1031 EXCHANGE + ARRANGED FINANCING

CLIENT CASE STUDY

First, complete an analysis (IPA) of their current real estate holdings to quantify current realized investment returns. Second, explore options that would improve returns. Third, once it was determined a larger property or properties would improve their position, execute a 1031 exchange.

Part 1: Complete Investment Property Analysis (IPA) of current real estate holdings. Review options and strategies to improve investment returns.

Part 2: Once decided that executing a 1031 exchange was the chosen strategy, properties to be sold were prepared for sale and all were simultaneously put on the market.

Part 3: Begin a search for a suitable 1031 replacement property in the $3.5M-$5.5M value range. Many properties were financially analyzed and physically screened. 

Part 1: The first property identified was a 30-unit multi-family property located in the core of downtown Medford, Oregon. However, the price/value was only a little over $2M, so a second property was ideally needed to optimize the allocation/investment of capital (equity) available. The search continued for a second property, however, nothing compelling surfaced. Our client decided to proceed in two phases and just purchase the one property at that time. 



Part 2: In the Spring of 2016, our client decided to do a cash-out refinance of their Medford, Oregon property and pursue a second acquisition. The second property targeted was a 16-unit apartment complex located in downtown Lake Oswego, Oregon (affluent suburb of Portland).

The primary challenge was identifying one or two suitable 1031 replacement properties that had a combined value in the target range ($3.5M-$5.5M). At the time, it was very much a Seller's market so there was much competition between Buyers for quality properties in that price range.

The timing and closing of the disposition (relinquished) properties was completed about 30 days before the closing on their 1031 acquisition (30-unit multi-family). All 1031 exchange proceeds from the sale of their smaller properties was invested in the Medford, Oregon property. All 1031 exchange rules were complied with and no capital gains tax was triggered.

The 1031 exchange acquisition was closed in late 2015 (30-unit, Medford, OR property - Price, $2,095,000) . The second acquisition was closed in the Fall of 2016 (16-unit, Lake Oswego, OR property - Price, $3,055,000). Realty Yield arranged the financing on both acquisitions.

The combined total value of these two properties was a little over $5M (the target range suggested from the IPA). The projected year-1 improvement in investment returns (previously owned smaller properties versus new properties) was over $50K in improved pre-tax flow with projected overall leveraged returns projected in the 18%-20% range versus 7%-8% on what was being cumulatively realized on their smaller properties.