How to Use 1031 Exchanges to Unlock More Listings

Have you ever asked yourself, how could I use 1031 exchanges to actually extract way more listing opportunities? If that is the case for you, if you are excited about this, you're going to love this show. But you got to get a little through it because he's giving a cell phone out and I'm going to give you a dollar if you text him. Just kidding. You need to text this guy because he does like 70% of all the 1031 exchanges in the US he and his company. So you're welcome in advance. Enjoy the show.

Have you ever asked yourself, how could I use something like 1031 exchange to actually unlock listings of people that don't even know that they can do it? Well, to help you do that, I got my guy, Russell Marsan. Give me some baby. Let's go. 70% of the 1031 exchanges in the US done by a little company called IPX. Russell, for the person that doesn't understand like, just give them like high level, what is ipx? What do you guys do? And then let's get into how this agent listening right now could actually use 1031 exchanges to unlock more listings.

Absolutely. And by the way, thanks for having me here, Tom.

Of course.

Yeah. So ipx, we're the largest qualified intermediary in the nation. Right? That's all we do is 1031 tax deferred exchanges. And if somebody's going to execute an exchange, they have to use a qualified intermediary. Parent company, Fidelity National Financial, Fortune 500 company. Highest level of safety and security. Personally, yeah, I'm the 1031 guru. Been doing it for 29 years.

You don't look that old, partner.

I'm old.

Have you been exchanged? No pun intended.

My wife is going to exchange. Maybe I told her she has to buy up.

All right? She's going to exchange you for maybe a better version of you.

So.

All right, so you've been doing this for 29 years. If I can ask first, like, why do you think the vast majority of real estate professionals aren't looking at 1031 exchanges as a way, like, think about it like 144 million single family, detached, attached, duplex, triplex, fourplexes in the US there's this number that's always floating around. Like 20 million of the 144 are owned by investors like you and I, like, you know, all the. And then a bunch are obviously very small percent, but a bunch are owned by these giant organizations. Why do you think most people aren't like using 1031 Exchange as a hook, as a marketing message to figure out through their title exec who are all the people that own all these investment properties and maybe I could show them how to unlock that asset and do something better with it.

100%. I've been teaching this for 29 years to agents. Right. It's a missed opportunity out there. I think the majority of agents, in my experience, they don't proactively pursue non owner occupied type properties because there's this misconception that they're investors, they know more than I do. Sure, right. So the majority of agents go after the owner occupied and leave them alone. It's a huge missed opportunity.

How many are there? Do you know the number in the US I haven't searched in a while. Like, like properties that are owned by an investor.

I have not.

Okay, it's, I know it's like so huge. The bigger thing is I would sit down with your title exec and I would ask the question, can we identify all the properties that are owned by LLC, by trusts, etc. With, with the assumption that a lot of those are going to be investment properties. And if you know that number. Right. You've been teaching this for 29 years. So I'm going to say, please look at the camera, tell my friend watching, what are some of the insights you've learned? What are some of the best headlines? What are the best marketing tactics to like cultivate these relationships versus oh my God, they know more than I do. Because we all know that's not the case.

Yeah, it's just a big missed opportunity. Anybody with assets like you talk about the silver tsunami a lot, right? The baby boomers, they own assets, not just real estate, but they have obviously stock, portfolio, whatnot. They have a financial advisor speaking to them every year and repositioning their assets every single year.

Right.

You know, so they're making, making sure as their financial objectives change that they're placed in the right asset class. Nobody's doing that for their real estate. Yeah, right. The Edward Jones of the world. They don't have nothing to do with the real estate. Right. So therefore most real estate investors don't.

Want you to invest more in real estate. They want you to buy more of their stocks, bonds, etc. Right.

So what happens is people are complacent in their real estate holdings. They buy and hold the same real estate their entire life and they think because it's gone up in value that it's done well and so therefore they're just going to keep it. But the Reality is, as somebody grows in age, their financial objectives change. It's a guarantee.

Right, Right.

And so, you know, when you first got into real estate, you were trying to build. Well, so you bought single family. Fantastic way to build, you know, appreciation. Right. Later on in life, you have a bunch of single family rental properties. You're retired, okay. You're in an asset class designated for appreciation when you should be in something designate for cash flow or going passive. Right. So those are. They're in the wrong asset class. It's huge.

So obviously you do a lot of education on this and you've spent your entire, almost 30, you know, 30 year career doing this. What, what are some of the biggest misconceptions? What are some of the things that people assume but they're not accurate? Like, like, can I sell my investment property and buy a second home? Can I. You know what I mean? Like, can I sell my property? Like, what are all the misconceptions?

Well, that's a great misconception. Well, actually, let's back up before we get to that one. There's a greater misconception and it's in that term, like, kind. Right. Such a misleading term. Like what was.

What do you mean?

Well, in a 1031 exchange, you can buy and sell real estate. Right. But the two properties involved in that exchange, the one you're selling and buying, they have to be like kind with one another.

Yeah.

Right. So there's this misconception. There's a visualization of.

Okay, well.

Duplex house or house not the case.

Right. It's not what a property looks like. It's how it's treated for tax purposes. Any business or investment property is like, kind. That's a huge marketing opportunity for realtors. Right. They should.

That's a video that people should shoot. Did you know, have you, have you thought about selling that property? But you're like, oh, I don't want another one of the same.

Yeah. Because if I own a five acre lot, right. I own a free and clear. Either inherited it or I bought it all cash. I have no mortgage on it. So in my mind I'm thinking it's not costing me anything.

Yeah.

The reality is cost me a lot in opportunity cost. Right. For sure. Because I have. It's a negative cash flow vehicle. Realtors should solicit those people and say, I can help you free up that stagnant Equity. You got $400,000 of equity in the land.

Yes.

I can free that up and help you buy your first rental property. Right. Now you have Income now you have depreciation, et cetera.

So like kind doesn't mean. So I could sell that property and I could go buy a second home, but I then got to classify it as an investment property. And then there's some other tax rules around that.

Yeah, absolutely. So, yeah, the like kind things. So you can sell raw land by single family. You can sell single family by multifamily, commercial, industrial. Right. It's all like kind. And therein lies the Beauty of why 1031 is the greatest wealth building tool in the Internal Revenue Code. Because if you look at the different asset classes in real estate, they all have different financial objectives. And so as your objectives change, the 1031 allows you to pivot right. To that type of real estate that better suits that current financial objective. Right.

Okay, so I'm going to share something with my audience and then I want you to tell them how you would organize it and market it, communicate to it, become the expert of it. So I think you should, like I said earlier, go to your title exec and say, let's figure out every single house in this marketplace. And then I want to segment them obviously by like, say single family versus like multifamily duplex, triplex, fourplex. Right. And it could be more than that. You can enter into the world of the CBRE and the JLL, which is like, you know, 10 plus 20 plus 100 plus units. But if you just focus on the little stuff, I think you're going to find there's a tremendous opportunity. I say 100% and I'll lead it. And then you, you like, bedazzle them. I say at the minimum, you should write them a handwritten note that just says, you know, dear Russell, congratulations on owning this fourplex now for 15 years. I assume at this point you probably depreciated it down to, you know, next to nothing. You've done, you know, all the cost segregation studies, et cetera. I look at properties like this all the time for clients like you. Would you like an updated valuation on the property? Would you like to know some of the properties that are trading off market in the area in case you ever wanted to exchange it? And by the way, if you need a great exchange agent, I have this friend Judy over at ipx. Here's her number. Reach out to her if you got more questions. I'd like a handwritten note.

Is that my name, Judy?

We were talking about Judy from Vegas a minute ago. So, yeah, I pay attention, Russell. But so, and I know there's a thousand more Things. So what else? So once they build the list, what, what are like all the best things you've seen agents do to extract those listings out of those 1031 exchange opportunities?

Yeah. So I've actually created postcard templates. Right. They can go onto my website and download them and stuff and the information's there. Right.

Okay, well what's your website?

The website. So it's a ww.ipx1031.com marsan my last name. M A R S A N. One more time. Www.ipx1031.com backslash marson m a R S A N. Cool.

So they can just go get download free templates.

Absolutely. But the hook is it's always, it's time to reevaluate real estate.

Right.

Because people hold it for so long and so the messaging is, you know, the market's changing because that's an honest statement anytime, right?

Sure.

The market's changing. Maybe it's time to reevaluate real estate. And, and there's a postcard that speaks to raw landowners. There's this postcard that speaks to people moving out of state.

Yes.

There's a postcard that speaks to multiple people that own multi single family rental properties. Like the baby boomers. Right. Different types of concepts. So it's, it's really just going after that demographic because there'. You're. You're exactly right. If you ask a title rep, hey, what, what type of properties do agents ask for contacts to solicit? Right. That's owner. That's. You have the owner occupied. Vast majority of realtors, you know, farming that and then you mentioned it. Jails. And everybody in the CBRE is going after commercial ag, all that stuff. But there's this middle ground. There's single family rental properties or one to four units. Right. As well. Raw land.

Right.

Those are things not solicited. Right. By realtors. They're, they're just, there's no attention being paid to them and it's an absolute goldmine. There's a question that every agent should ask every single client they touch. It doesn't matter if they're, what are they buying or selling. Ask them this question. What other real estate do you own? Yes, ask them that question. And some agents are like, well, it's too personal. No, it's not. Right. My Edward Jones guys, he knows everything about me.

Right.

Intimately. Right. And so you need to position yourself as your client's real estate financial advisor.

Right.

And you need to do financial analysis on their properties to make sure those properties are meeting their goals and if they're not, you're going to help them. Listen, sell them.

All right, I'm going to give you it. Scratch that other letter. I told you so. So I'm going to give you one instead. This is more personal. It's my brother in law who happens to be one of the, the top surgery center sales brokers in the country. You know what he's done? So listen to this, my friend. Listening. What he does is he basically writes him a letter, right, and sends him a package. And here's the information on your property and here's what' on, but here's the hook that he uses that gets the most phone calls. He's going to bug me for sharing this. Shout out to Colin. Here's what he does. He says, russell, when was the last time someone took the time to reevaluate all of your lease agreements to make sure A, you're at market rate and B, you're not putting yourself at risk? If you would like, we do a free sort of risk and market rate analysis of your rents. All you need to do is click this QR code, you know, send me a note, send me a text and just say rents and we'll do it for you. What he told me was when he started doing that, think about like these doctors are busy being surgeons, right? They own these surgery centers. There might be two of them, eight of them, 20 of them. And eventually people start to retire and want to sell those assets. And he has been basically nurturing them now for like a decade. So every year he's doing a large number of transactions. Big average sales prices you can probably imagine compared to like traditional sort of SFR business. And it's all because he's just providing a service that that person probably doesn't have. The broker that sold it to him has probably bailed and moved on to something else. Right. The next big whale as an example, or the agent that sold him a bunch of those SFRs might not even be in the business anymore. So I really like that angle. But what do you think?

Yeah, that's basically you're describing my postcards.

All right, all right, well, podcast over.

You know, it's time to reevaluate your real estate and connect with me for a free market analysis, financial analysis on your properties today. Because it's just a analysis to help you to determine whether or not you're in the right asset class. Who wouldn't want that?

Exactly.

Nobody's paying attention to them.

What, what are the other misconceptions.

So you mentioned earlier about the second home vacation. Yeah. Right. In a 1031 exchange, you can't buy personal use properties.

Right.

Has to be business use properties. But the IRS created my absolute favorite revenue procedure back in 2008. It is Revenue Procedure 2016.

Ever heard someone say, and my favorite.

IRS, I'm a tax nerd. I have no life.

Okay, let's go.

I read this reven procedure every night before I go to bed. It gives me very happy dreams. So it's a safe harbor. And they don't label a lot of revenue procedures as safe harbor. Right. Because if they do, that means you're safe from them. They don't like us to feel. Right. So this revenue procedure is the IRS telling us. Here is exactly how you can use a 1031 exchange to buy a dream home. Was primary, second home, vacation home. So here's the way it works. Sell your investment properties. Buy your dream home with the 1031 for the first two years after the exchange, you have to treat the property two ways. One is you have to limit your personal use to two weeks a year or less, or 10% of the annual rental history. Now, if you're going there for maintenance purposes, that's not a personal use visit. Right. So there's ways to use it for more, but still you have to limit your purchase.

I get all my maintenance over Thanksgiving and Christmas. Yes.

We're not recording this. Right.

So the second thing you have to edit that.

The second thing you have to show is income. But that's a crazy low standard. You only have to show two weeks per year of income on it. Wow, that's crazy. Yeah. So you literally, if you don't need the income from it, you're buying your dream home. Typically, the last thing you want in your dream home is tenants anyway.

Right?

Right. So you can buy it, take all your cash, don't pay any taxes on it. From the sale of your investment properties. Buy your dream home, all cash for the first two years. Limit your personal use. Find your best friend to rent it to for two weeks a year. After two years, do whatever you want.

That's a. So I knew the two weeks because, you know, my tax advisors always remind me of that. But I didn't know the two years. That's. That's okay. Podcast. I got exactly what I need. Thank you very much, guys. I have to go call my tax.

Guy, but that's a great question for your realtors. Ask their clients.

Right.

In the next two years. Yeah. In the Next two years. Are you thinking of moving to another primary? Are you thinking about buying a second home or vacation home anywhere in the United States? Right. If the answer is yes, I can list and sell your investment properties now and accomplish those goals for you.

Right. Dreamed about the lake house, the mountain house, the whatever. Yeah. Or the retirement property that somewhere. Somewhere warm and you're someplace cold.

Yes.

Okay, so other misconceptions. Let's wrap it up with one more. What's one more big misconception that people don't get get. And then we have to link up Brian, Brian in the show notes his website. Okay.

Yeah. So not necessarily a misconception, but I think the biggest opportunity right now for realtors out there is to solicit baby boomers.

Yes.

That own single family rental properties.

Yes.

Baby boomers, as you mentioned, all the time.

Yes.

Silver Tsunami, 20% of the population, but they own 41% of the residential real estate. It's actually more skewed number than that because a lot of those baby boomers are married to each other. Yes. So it's probably 13% of the population owns 40, 41% of the single family residential income properties. Right. That's a lot of single family rental properties.

Yes.

If you are a baby boomer and you own a single family rental property, you are absolutely 100% in the wrong asset class. Yes, you are. This isn't sales. This is financial analysis. This is math. And it's right 100% of the time. Yes. You're in an asset that is designated for appreciation when you should be capitalizing on cash flow and maybe even going passive.

Yes.

Right. Where you want to go. 100% passive. So.

Right. More like a triple net lease.

Triple net lease. Right.

Part of a shopping center.

Exactly. A dst, Delaware statuary trust. Right. Those types of things. Absolutely. And I'm telling you it's not on their radar to sell, even though subconsciously they would love to because they're tired of dealing with tenants and they want to retire from it.

I'm either going to make you really happy or really angry. And either one is fine because Russell and I are friends. If I was a really smart person listening right now, you know what I'd be saying to myself? How do I get Russell to be on a podcast with me to, to pop in and share like 10 insights that I can like, then send all my clients or would would Russell co author one of my blogs that I want to become the person, you know, who's, you know, using AI search. Right. With blogs Right. How do they reach you?

Well, they can reach me. My cell phone is definitely the best way to reach me.

You're about to get yourself under a lot of people. That's fine.

I have no life. I.

867-5309. His name is Jenny.

No, myself, I. Every Friday night, I sit by the dining room table with a bucket of popcorn. I'm eating my popcorn, waiting for your call. All right, Life, it's all.

Let's go.

So cell phone number is 530-755-8355.

This could be one of the reasons why, my friends, that his company, IP Access, 70% of all the 1031 exchanges in the U.S. i. I feel terrible that I don't know. So I'm gonna be smart and I'm gonna ask, what about Canada? How's it work in Canada?

So you can exchange us for U. S. Yes. Or foreign. For foreign.

Okay.

Can't mix the two.

So I can sell a place in Mexico and buy a place in Whistler.

As a U. S. Taxpayer? Yes. And you'd avoid U. S. Tax by doing so. Right. But you can't mix the two.

Okay, can't mix the two. Do you know the rules in Canada?

What do you mean? The rules in Canada?

Yeah, the 1031 exchange.

Well, no. No, they don't. No, there is no equivalent.

Okay.

No. All right, Canadian friends, as a US Taxpayer.

I got you. I got you. All right, so as we wrap this up, Russell, first of all, very cool that you gave him the website. The website again, don't say www. That does date you.

I told you, I'm old.

It's ipx1031.com ipx1031.com backslash Marsan.

M A R S a n s.

A n. How many direct mail postcards do you have there that they're gonna go download? How many letters and samples are they gonna go grab?

I think six on there. A couple of them are dedicated to state because, you know, once again, federal. Right. That's a big opportunity for realtors to go after out of state owners as well. Especially in states like California where they have the big exodus going on. But all states experience, you know, people leaving for various reasons. And the 10. It's a huge opportunity for realtors to solicit those people with the 1031.

Does somebody need to become a, like a registered, you know, 1031 exchange expert if they're a real estate agent?

You mean to have some kind of designation as a realtor?

Yeah.

Not to get into our Business, but just have a designation. There is no designation. Okay, all right, but I will, gladly.

But I got a guy. I got. I got Russell. Who's the guy?

You don't have to be the expert. You just have to know my phone number. Right. I love that. I love that.

Well, I really appreciate you being on the show. You know, you and I've been traveling around and seeing each other in a bunch of locations, and I'm like, eventually we've got to do a show to educate my friends. So if you have a question, I would text him the question, too. If there's something that, you know, like we knew we had a finite amount of time to do the show today, you got to sell. I would text him, make sure you tell them who you are and all that stuff. Don't just ask the question. So kind of closing thoughts, like you've given a lot of insight here. They're all going to go out. They're going to build a database of customers that own investment properties. Probably going to look at them by the age group. You know, again, appreciation for SFRs versus cash flow. You know, and even. Even if they own it and free and clear, it's still a pain in the butt if it needs to be rented out. You go, you know, you go, cash flow negative. A little bit like it's better to be in a better asset class. Like this is common sense. Are there any last insights before we let them go?

So just understand that. Don't be intimidated by going after these clients. Right. Because they don't know. They're not. They're a retired teacher, they're a fireman, they're a policeman. They don't know financial analysis. And it's to no fault of their own. You know, I work with clients all the time that own single family rental properties and they think they're cash flowing 10% a year.

Yeah.

The reality is it's probably 2%. Yeah. Right. So, you know, this, this financial analysis, math.

Yeah.

Right. People that are not thinking of selling their properties after you do the financial analysis with them are now wanting desperately to sell their properties.

Is there a calculator on that website that an agent could. Is this something we get to call Jeremy Davis over at Palm Agent and say, jeremy, we have a new calculator for you.

We have a capital gains calculator on my website as well. Absolutely. We have all kinds of tools. Our newsletters are phenomenal. Just all kinds of stuff on.

I would take all of his newsletters and I would just put them into chat GPT or perplexity and say rewrite these as they're coming from me and then post them on your blog. Right. That's a really good idea.

100. Should I give the email address or.

I think they have your cell phone. That's more than enough. Well, my audience is going to be aggressive. All right. So, Russell, thank you so much for being a part of the show. Us some feedback in the comments, you know, did you enjoy this? Are you going to follow him? Are you going to text him? Let us know. And thank you so much for just being a part of my community, being who you are. I'm always thinking about you. And I promise to do more shows and continue to make a difference. Keep moving forward, my friend. And you, buddy, thank you so much.

For being on me. All right.

Take care.