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1031 Exchanges for Millennials

Over the past decade, the real estate industry experienced an explosion of new, young investors allocating billions of dollars through online platforms, cloud-based real estate marketplaces, web-auctions, sophisticated investment vehicles like crowdfunding, DSTs, REITs, etc. How are 1031 QIs supporting this emergent economy? If the current 1031 Exchange industry cannot meet the real estate investor in this high-paced tech world, then the role of “today’s” Qualified Intermediaries becomes diminished.
millennial real estate investors and 1031 exchanges

The cottage industry of 1031 Qualified Intermediaries (QI) provide for the regulated role to help set up and complete a 1031 exchange, also known as a safe harbor like-kind exchange. Since introduced in the 1031 regulations in the 1990’s, the QI continues to ensure routine investments in real estate are structured to meet the deferral tax requirements while stimulating the economy through reinvestment. The role of the QI is not passive, quite the opposite. Full-time Qualified Intermediaries dedicate an exorbitant amount of resources to training their staff, educating the market, and supporting their 1031 client through a complex powerful tax deferral tool, a 1031 exchange. The result, increased investment back into the U.S. real estate market.

Millennials’ Role in Real Estate Investments

Over the last ten years, the real estate industry experienced an explosion of new, young investors allocating billions of dollars through online platforms, cloud-based real estate marketplaces, web-auctions, sophisticated investment vehicles like crowdfunding, DSTs, REITs, etc. Although the majority of the U.S. real estate market is still held by those 55 years or older, we are quickly seeing young, tech-savvy, motivated investors choose real estate over stocks, bonds, and mutual funds to place their excess wealth. Millennials aren’t searching “for-sale” ads in the classified sections in our newspapers. Nor are they spending time attending an open house in person. Make way for the real estate investor of 2022. They are armed with more data at their fingertips than ever before. These well-informed young investors are moving quickly in today’s market where inventory is low, prices are high, and the time to act on the perfect investment is measured in minutes – not weeks. Today’s 30 something virtual real estate investor is deeply knowledgeable about how to find the right investment and when to sell.

How Will Qualified Intermediaries Support Millennial Investors?

How are 1031 QIs supporting this emergent economy? If the current Internal Revenue Code Section 1031 states that "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held for productive use in a trade or business or for investment." 1031 Exchange industry cannot meet the real estate investor in this high-paced tech world, then the role of “today’s” Qualified Intermediaries becomes diminished. As the aging real estate investors make their final sale and choose not to exchange, the younger tech generation of real estate investors is moving in quickly, ready to transact. Electronic agreements sent for e-signatures, text alerts notifying funds have been wired or received, artificial intelligence used to suggest the perfect investment, POAs transferred to market-makers to make rapid decisions when criteria is met, Crypto currency used for down payments, block-chains required to secure the new investment; the list progresses daily. Are you ready? Where does this new real estate investor fit with your services? Are you the legacy QI, “cog in the wheel”, that puts the brakes on this new reality? Does your paper-based process of mailing, faxing, in person funds transacting, requiring superfluous wet-signatures frustrate the rest of the real estate supply chain? Does your email reply alert the marketplace you need days, if not weeks, to set up a 1031 exchange? Or are you able to meet your client in the space that they require you to deliver your services? Don’t confuse a fast-paced, automated delivery platform with cutting corners, increasing risk, or sacrificing an outstanding client experience. As a matter of fact, working in today’s cloud-based, highly secured, single data entry platforms through API integrations, common workflows, and automation not only ensures consistent compliance, but also delivers a client experience that is expected.

QI Technology Adapting to Today’s Real Estate Investor

Accruit’s The transfer of the relinquished property to the Qualified Intermediary, and the receipt of the replacement property from the Qualified Intermediary is considered an exchange. To be compliant with IRC Section 1031, the transaction must be properly structured, rather than being a sale to one party followed by a purchase from another party. Exchange Manager™ and The transfer of the relinquished property to the Qualified Intermediary, and the receipt of the replacement property from the Qualified Intermediary is considered an exchange. To be compliant with IRC Section 1031, the transaction must be properly structured, rather than being a sale to one party followed by a purchase from another party. Exchange Manager Pro™ SaaS offerings are meeting today’s and tomorrow’s real estate investor expectations by delivering a service that routinely produces an 85 or higher NPS score due to less friction, higher security, greater transparency, and a deeper engagement with the QI. Accruit’s The transfer of the relinquished property to the Qualified Intermediary, and the receipt of the replacement property from the Qualified Intermediary is considered an exchange. To be compliant with IRC Section 1031, the transaction must be properly structured, rather than being a sale to one party followed by a purchase from another party. Exchange Manager™ and The transfer of the relinquished property to the Qualified Intermediary, and the receipt of the replacement property from the Qualified Intermediary is considered an exchange. To be compliant with IRC Section 1031, the transaction must be properly structured, rather than being a sale to one party followed by a purchase from another party. Exchange Manager Pro™ are keeping pace with the needs of the new real estate investor. The QI industry must do its part to ensure IRC1031 stays compliant in today’s hyper-paced real estate market. Leveraging technology and radically improving the workflow not only keeps the QI industry relevant, but also keeps the QI participating in driving reinvestment into the US economy.

To learn more about our SaaS offerings visit Exchange Manager Pro™

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