Trading Up in Denver - 1031 Exchange

[Nick Mertens]

We had an investor who was struggling with a property he had purchased a few years ago, and he was self-managing. The building was running in the red and needed a lot of money for capital improvements. The owner was sick of dealing with it and asked us to help with the management. 

After talking to him a little more, we realized his actual desire was to pull some money out of the building to invest elsewhere but was worried about the appraisal and state of the building. He also wanted the building to cash flow for him. This was a small 6-unit building, and the owner had bought it during the downturn.

To solve his problem, rather than taking over the management, we located two other buildings that were in better condition, had better cash flow, and were in the path of development. Additionally, both buildings were not at their rent potential. We helped the owner do a 1031 exchange on his building and buy the two others. He was able to cash out the money he wanted, have a better cash flow situation, and his capital stock on the new buildings was better. We now manage those for him as well and we were able to boost rents in the first four months on average of $150 per door.

Solid success--for him and for us!