So far this year, the ACI 35th Anniversary articles have explored memorable transaction and 1031 exchange examples of the past and present. However, an element that has only been touched upon is the strong professional relationship that an agent can create with a property investor. In the process of building your wealth we are also building lasting connections with clients to open the door for continued success when growing your portfolio. Such is the topic of today’s article, a lasting comradeship between an ACI agent and his client. For ACI Senior Vice President Terry Taylor, this relationship has spanned multiple years and a number of exciting transactions.
Terry remembers the first time he became acquainted with Earnel, a local investor looking to break into the San Diego market. “He had called me about one of my listings and that he had sold a property up in Los Angeles”, Terry recalls “he and his wife, June, really wanted to buy some apartments in San Diego. I was happy to help”. Terry began investigating local leads after establishing Earnel and June’s interest to break into the market, with a focus on a decent sized property that wasn’t too large. After a few days search, Terry produced a listing on Kansas Street, a 9 unit property in the neighborhood of University Heights. For many investors, this is where the story ends. Transaction complete and investments locked.
However, Terry knew that a commercial real estate agent has an obligation to keep future interest of his client in mind to optimize their investment potential. “I did a good job helping with Kansas Street, so I kept in touch always making myself available in case Earnel and June every wanted to expand their investment. Sure enough a few years later they wanted to trade up into more units”. A definitive search by Terry revealed a possible match in 18 units off Idaho Street in North Park. Terry recalls the transaction being slightly intense. “It was a tricky deal because we did not have their Kansas Street building in escrow, so we had to secure the up-leg deal on Idaho Street and then quickly sell the Kansas Street building”, Terry remembered bemused “Thank God we found a buyer quickly for Kansas Street and we were able to make both deals happen almost simultaneously, closing within days of each other.”
By acquiring the property on Idaho, Earnel and June literally doubled their investment from 9 into 18 units. As Terry notes, this should always be the cause of celebration. “Whenever you can increase the number of units you own and also increase your cash flow, it is a very beneficial thing to the investor” he explained, “because they have increased the amount of real estate they own and they have increased their upside potential in their income because as rents increase they will have a greater increase in their cash flow because they own more units to increase the rents.” This upside potential is one of the factors that spurred Earnel to approach Terry about trading up yet again. “I kept in touch with them and when the values began climbing to where they had a large enough equity position in Idaho Street to buy something larger that would make some financial sense, I started keeping my eyes open for good opportunities for them.” This resulted in a new transaction in La Mesa, a 27 unit property for sale off Parkview Drive.
Once again the up-leg process for selling Idaho Street simultaneously was of great importance to Terry. “I hustled to find the right buyer which happened to be the seller agent’s buyer which helped grease the trajectory of both transactions in a positive way that benefited everybody”. Terry sees a very bright future for Earnel and June in the San Diego market. Both of their transitions into more units came from a 1031 Tax Differed Exchange. I believe Earnel and June will want to continue increasing the number of units they own once their equity has grown enough to realistically trade up.” he notes. “It would be an honor to help them again, as their story is a perfect example of if you make good trades up you can dramatically increase your overall holdings and also increase your cash flow over time because you have in effect tripled the number of units you own.”