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July 25, 2016

The Bad News and the Good News

Bad News / Good News. That was the situation facing one of Ann Arbor’s leading property owners recently.

The good news: One of his profitable retail properties was under contract for sale, not only the property and its building, but the air rights as well. He’d owned the property for decades and had seen its value rise considerably.

The bad news: He’d owned the property for decades, during which he’d taken full depreciation deductions and had seen its value rise considerably. Meaning he was about to reap a large taxable capital gain.

The owner realized his situation was ideal for a 1031 Exchange. He also realized he would have to act quickly, before closing on the sale of his retail property, to engage a commercial broker that not only knew the local market, but was also well versed in the intricacies of 1031 Exchanges. His first and only call was to the Thomas Duke Company.

Duke Company brokers Jim Porth and Sarah Grabinski got right to work locating an exchange property that would be a worthy investment for their new client. A 1031, or tax-free exchange, not only defers the capital gains tax due, it also lowers the taxpayer’s basis going into the second investment. And it makes little sense to exchange into a poor property without upside.

Jim and Sarah helped their client define his acquisition/exchange criteria: student housing near the University of Michigan’s central campus that would satisfy the amount required for the exchange. With their deep knowledge of the student housing sector, they then quickly began to identify properties, evaluate their locations and conditions, analyze their incomes and expenses, and contact their owners.

Though properties that met the criteria were scarce, with their expertise, experience, and hard work, Jim and Sarah were able to locate an investment that allowed their client to defer his taxable gain and achieve his goal of entering the student housing market all completed smoothly on the 1031 Exchange timetable and with minimal stress.  In the end it was all good news.

The expertise, experience, and proven approach of the Thomas Duke Company can help you achieve your real estate investment goals, too. Call Jim Porth or Sarah Grabinski at 248-476-3700, or for more information on our company, visit our website: thomasduke.com.

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