Interview on 1031 Exchange by Richard Gumbiner

Yes, this is Hans Hansen with Starboard TCN Worldwide's podcast for April 2013.

Today I'm with Richard Gambiner, one of our investment brokers.

Richard, thanks for joining us.

Thank you, Hans.

So, Rich, tell us about what is a 1031 exchange?

A 1031 exchange is a way for an owner to sell their property, keep their equity intact,

and use that equity to transition into another property of their choosing.

The difference being that if you were to just sell your property, you would then of course

have to pay your taxes.

You'd be left with less of your cash equity from the sale with which to transfer and turn

around and buy another property.

With the 1031 exchange, you're allowed then to carry forward the full amount of your equity

going forward into the next property, and it allows you to leverage and possibly purchase

a larger property.

So, tell us about this property across the street.

Okay, this green building behind us is a 1920s era 24-unit apartment building.

It was owned by the same husband and wife for many, many years, and over the years it

suffered some deferred maintenance and eventually got to the point where they felt that they

were not able to put in the cash needed to fix up the building and bring it up to modern

standards.

So, Rich, you said that this building was owned by an older couple that were tired of

the deferred maintenance.

They wanted something to simplify their lives.

What did they decide to do with it?

Yes, well, they had retired, and so they decided to get out of the property that required more

maintenance and management and purchase something that required little or no maintenance or

a newer property and one that was leased by one entity, a credit tenant where they would

have no problem collecting rents.

So, Rich, what properties are best for a 1031 exchange today?

Well, this is really a personal choice.

Some people are more comfortable owning the same kind of property they used to own, for

instance, maybe going from an apartment building into another apartment building, and in other

cases they're looking for a change.

Possibly, lowering their amount of money.

Okay.

They're looking for a change in the amount of management that's needed, so they may be

looking for a property that has low maintenance and management, where the tenant pays for

the cost of operating the property.

That would be known as a triple net leased investment, such as might be with a Burger

King or a Round Table Pizza building or other types of investments where the tenant covers

all the costs of ownership.

And another consideration is estate planning.

An owner may want to change.

They may want to change the type of property they own for purposes of passing the property

down to their heirs, maybe a property that will be easier for the heirs to handle with

less management headaches.

Well, thank you, Rich, for participating in our podcast today.

We really appreciate it.

And thank you for listening and watching.

And if you'd like more information on Starboard Commercial Real Estate, please visit us on

our website at www.starboardnet.com.

Starboard handles office, retail, and home.

Investments, warehouses in San Francisco, Bay Area, and beyond throughout the United

States and around the world with our affiliation with TCN Worldwide.

Thanks for listening.