Background: In October 2022, a multifamily broker in the Austin Partners office reached out to Landan, a real estate investment firm, to assist a four-party family partnership in finding a solution for their aging properties. The siblings owned two assets and wanted to eliminate the management responsibilities while guaranteeing long-term passive cash flow as they approached their golden years.
Challenge: The family partnership was exposed to nearly $1.7m in capital gains and depreciation recapture taxes due to the length of time they had owned these properties. They needed a solution that could protect their equity and maintain their cash flow.
Action: Landan met with the siblings over multiple in-person and video conference calls to understand their goals and objectives. They identified a 1031 exchange as the logical solution to solve their problems. Landan identified, underwrote, vetted, and negotiated on over 80 individual properties to find a small subset of highly qualified properties that were suitable for each of the four partners and were the right dollar figure for the total $5.6m exchange.
Results: Landan identified a 20-year corporately guaranteed Schlotzky's in Liberty Hill, Texas, for $1.8m and a $3.82m 15-year Mister Car Wash on one of the busiest roads in Round Rock, TX. The two properties had a blended cap rate return of 5.95%, which was a 20bps increase over what they sold the multifamily for. The family partnership was making more money with zero responsibilities. They avoided $1.7m in taxes, and now 100% of that equity is hard at work generating a higher return than ever before.
Testimonials: The family partnership was grateful for Landan's assistance. One of the siblings said, "We sold a property one year ago and had to write a check to the government for $980k and lost our monthly income in the process. We thought we were going to have to hold onto this last property for the income, despite the fact that we were trying to retire. [Our broker] Jason introduced us to Landan who showed us how we could recreate and ultimately increase our income by trading that asset into the Schlotzsky's."
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