Ep. #944 - How 1031 Exchanges Support Entrepreneurs
In today’s episode of Startup Hustle, Matt DeCoursey shares an insightful discussion on 1031 exchanges with Alex Olson. Our guest is the senior real estate broker from Xchange CRE. They talk about the 1031 exchange—what it is, how it works, and its benefits to entrepreneurs.
Covered In This Episode
Today’s episode is a great one for entrepreneurs in the real estate industry. Alex and Matt are talking about the ins and outs of the 1031 exchange.
What is this process, and how does it work for property owners and investors? What are opportunity zones and their purpose? Are there major mistakes you should avoid when investing in real estate?
Learn more about these things and grow your own wealth in this Startup Hustle episode.
- Alex Olson reminisces on his backstory (01:58)
- What is 1031 exchange? (04:38)
- The difference of 1031 exchange and an opportunity zone (07:52)
- What is the intention of creating a 1031 exchange? (09:00)
- The definition of the 1031 tax-deferred exchange (12:37)
- Does Xchange CRE specialize in the 1031 exchange? (15:19)
- Are there opportunity zones in Kansas City? (16:47)
- On earning money in real estate and how not to get stuck (18:57)
- Being an entrepreneur in the real estate scene (22:19)
- The biggest mistakes investors make when attempting a 1031 exchange (24:04)
- What is a qualified intermediary? (25:53)
- On leveraging a 1031 exchange (28:01)
- What can Xchange CRE do for you? (29:57)
- Off-market listings on the Xchange CRE website (32:04)
I didn’t make money quickly. Real estate isn’t usually like that. And that’s part of why it hasn’t really been my thing because I don’t have the patience to wait ten years.– Matt DeCoursey
You can put fifty thousand, hundred thousand dollars into syndication. And that syndication might promise or hope to get you 8% to 10% on your money. You’re still in the real estate game, at least in that business, because you’re owning a piece of that pie. When they sell, there are 1031 exchange opportunities for you out there.– Alex Olson
Most people might have hated that they had to do some toilet work, clean some faucets, and stuff like that. But when they look at how much that duplex or five plex or whatever is actually worth now, they are very happy they did that. And there are all sorts of ways to overcome those objections in your mind.– Alex Olson
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Following is an auto-generated text transcript of this episode. Apologies for any errors!
Matt DeCoursey 00:01
And we’re back! Back for another episode of Startup Hustle. Matt DeCoursey here to have another conversation that I’m hoping helps your business grow. So, are you aware of how 1031 exchanges support entrepreneurs? I’m not that much like you. I’m getting ready to learn how and why; that’s what we’re going to talk about in today’s episode of Startup Hustle. Before we get too far into that, today’s episode of Startup Hustle is powered by FullScale.io. Hiring software developers is difficult, and Full Scale can help you build a software team quickly and affordably. And has the platform to help you manage that team. Recently named in the Inc. 5000 as one of America’s fastest-growing private companies. Visit FullScale.io to learn more. With me today, I’ve got Alex Olson. And Alex is a senior real estate broker at Xchange CRE; that’s Xchange C-R-E. There’s a link for that in the show notes if you want to learn more about what they do. But we’re gonna talk all about commercial real estate and a couple other things. So I guess without further ado, Alex, welcome to Startup Hustle.
Alex Olson 01:07
Hey, thanks, man. Yeah, this is awesome. Glad to be here.
Matt DeCoursey 01:10
Yeah, I’m looking forward to, as I mentioned, learning more about . . . I’m not going to claim to know anything about 1031 exchanges and how that supports entrepreneurs. Before we get into that topic, let’s get a little bit more about your backstory.
Alex Olson 01:26
Yeah, so, I mean, I love the entrepreneurship discussion. I’ve been an entrepreneur since I was probably eight years old, pretending to develop my own business and sell my dad’s junk tools at the end of a driveway in the country. By the way, we had no customers. But then, also, as I became older, I always had two jobs and then a side gig of some sort. So I actually developed a movie social network back in the day and made a few dollars selling advertisements. And then, I sold that company to my partners and was always looking for something different. And when we built our dream house, my wife and I fell in love with the real estate process. You know, financing creativity, how things look and feel, all those kinds of things. And so I bought a duplex. After that, we’ve done a great job of building our house. And by that, I mean we had a bunch of equity already built in after the house was completed. So I use that money. So for home equity, we had to pull out a loan and buy a duplex, a five plex, and a couple houses over a couple year period. And you know, that was great. It was some fun income. I didn’t make a lot of money doing it right away, which you usually don’t in real estate, full disclosure. But through that, I actually met a mentor who I was trying to buy his house from. He is actually gonna turn it into a big Airbnb house. And he’s like, man, you’re really persistent, let’s meet up. And so I met up with him, and he’s like, you need to go and get your real estate license. I’m like, dude, I have no interest in becoming a, you know, single-family home agent where I’m showing houses and telling people how great the color of the paint is. All that kind of stuff. And he said, no, no, I want you to become a multifamily specialist in commercial real estate. Long story short, after that, something immediately clicked in my head. I immediately studied for the real estate exam, got my real estate license, and hooked up with a local brokerage firm that could show me the ropes. I met some great people from there and fell in love with what’s called a 1031 exchange in real estate, which I’ll talk about in a little bit. And been doing that here for a couple of years. Started as a side hustle, but it’s been full-time now for a couple of years. And it’s been awesome.
Matt DeCoursey 04:00
So let’s just get into the nuts and bolts here and the meat. What is a 1031 exchange? Let’s just start there.
Alex Olson 04:08
Yeah, a 1031 exchange is for real estate investors. And it allows you to take any type of real estate investment that you own, sell that investment, defer all of your capital gains, so you’re not paying any taxes on that at the time, and buy another real estate investment property. And you’re not paying taxes doing that. And the reason why that’s an important tool for, you know, entrepreneurs or people that have dabbled in real estate in the past, and I’ll get into an example, but that allows you really to upgrade your portfolio by really doing not a whole lot and you’re avoiding taxes, which you know, is kind of unheard of in the world. Today.
Matt DeCoursey 05:01
So it’s similar to opportunity zones, except you don’t need to be in an opportunity zone.
Alex Olson 05:07
That’s exactly right. So opportunity zones are a little bit different in how they’re structured, of course. But I’ll give you an example. Let’s say you have a single-family home that maybe even you bought as your first residence. But in the last 10 years or five years, you’ve turned it into a rental property. And maybe you paid $100,000. For it, it’s now worth 350. All right, so do the quick math. There, you have $250,000 in equity sitting in this house. And maybe it’s only renting for 2000. So you’re not really generating too much cash flow from this house. Yeah, it’s great, maybe you make $1 or two, but it’s just sitting there. And you have all this untapped money that you’re not using in the house because of appreciation or whatever. So you can take the 1031 exchange, you can sell that house to another investor, and go out and take that $250,000 that you have gained via appreciation, maybe you’re paying down some debt to and take that $250,000 and invest it in a million dollar property, or maybe even a $1.2 million property, and cash flow 10 times what you were cash flowing before and paying no taxes and doing it. So in that scenario, you’re taking your 250 binds a million bucks, and you probably had the one house, and now you have, let’s say, eight to 12 units and an apartment complex, that you probably have somebody else managing it for you as well. So that’s the power of a 1031 exchange.
Matt DeCoursey 06:54
So I understand the purpose of why opportunity zones were created. And for those that aren’t aware, an opportunity zone, there’s like 9000, or something of those in the United States. And they’re usually areas that have seen better days and need some kind of revitalization. So these opportunity zones allow for not only investment in real estate but investment in businesses. And if you believe and correct me if I’m wrong, if you hold on to them for seven years, it cuts your capital gains in half. If you hold on for 10 years, there is no capital gain. Is that correct?
Alex Olson 07:28
Yep. That I believe that’s correct. And that’s the important piece that you said more at the beginning, which typically has seen better days, those areas and relies on a lot of development and putting funds in. So you have to have a really experienced opportunity zone, also called an AWS fund investor, that you’re trusting your money within that situation.
Matt DeCoursey 07:54
The problem with opportunities zones is that the Well, I mean, these are dicey areas, for the most part, to get started with. So I mean, even though you might defer some capital gains, owning real estate in areas that aren’t in demand isn’t always the greatest move. But what was the purpose of creating 1031? Was there some intent behind that?
Alex Olson 08:20
Great question. So yeah, a lot of the intent actually dates back to the 19 teens, when it was first introduced. And it’s a federal tax code. But anyway, in the 19 teens, it really was designed for farmers and farm owners. Landowners could exchange sales of property without having to pay the tax burden. And then from there, there were a couple of differences, of course, lawsuits and court cases and changes to it in the 1920s. In the 1950s or so, it was sort of codified as a federal IRS tax code. And then, of course, more lawsuits and different things happened to shore up the requirements for it because what happened was, prior to the 1970s, there was kind of an unlimited timeframe on when you could identify and close on a property. And then in the 70s, they had, you know, a court case or whatever, and it shrunk the timeframe down so once you sell your property, that property that you’re relinquishing, you have 45 days to identify up to three properties and all that kind of stuff was codified in the 1980s and really has remained for the most part on changed since then, you know, the main part of the 1031 exchanges you can take any type of real estate farm ground you know a vacant lot, apartments, commercial, whatever, and exchange into any other type and you can also exchange in an Out of any other states, so you could be in Kansas, and you want to take your farm ground in Kansas and buy a skyscraper in Nashville, you could do that. And defer your taxes.
Matt DeCoursey 10:11
But you have to sell it to another investor.
Alex Olson 10:16
Yes, well, I mean, yeah, that well, no, I a farmer would be an investor in that situation.
Matt DeCoursey 10:21
But in general, but in general with 1031.
Alex Olson 10:24
Yeah, you can’t, you can’t take a personal property that you live in, or use it as a vacation rental, and sell that. You know, and keep, you know, try to pretend like that’s an investment property. And there are all sorts of things you can do to prove that the other pieces you can’t do, like you can’t flip houses, right. So I can’t go down here on a certain Boulevard or whatever and buy a house for 10,000 and sell for 100. You know, four months later, because that’s more considered a business transaction. That’s not a real estate investment. So there are certain rules around that the big thing you have to remember is, you have to have owned a property for a rule of thumb is a year although we actually have had clients that have owned it for five, six months. And they had no intention of selling, but an off-market offer came to him and offered him too much money. And they were able to claim that as a 1031 exchange.
Matt DeCoursey 11:27
I think it’s obvious that it’s always so interesting, the things that survive from I mean, you’re talking 100 years ago. Yeah. And the interesting ways that entrepreneurs and investors find to use it now, by the way I do I have an actual definition. Other than just our comments, or Alex’s comments, I shouldn’t say our mine are very uninformed on this subject, a 1031. tax-deferred exchange, known as the 1031 exchange gets its name from section 1031 of the US Internal Revenue Code, which allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits on a property or properties of like, kind are equal or greater value. So congratulations on being very accurate with the definition version. But yeah, well, you know, sometimes you can read this stuff, and you’re like, What is this shit? Like, it doesn’t always make sense to people. So yeah, the thing that I find interesting, you know, here on Startup Hustle, we like to delve into so many different shapes and forms of entrepreneurship. And there’s people that are entrepreneurs everywhere, like We’ve even talked about like that bands are startups. And yeah, I worked in the music industry for a while. And I got reminded of that, as I went and saw my buddies from Unfreeze McGee perform in front of 1000s of people a couple of weeks ago. And one of the guys was like, Well, what’s your podcast about? I was like, it’s about entrepreneurship and business owners, just like I’m a business owner. When it comes to real estate, there are a lot of quotes, business owners that might not always think of themselves as business owners. And you know, honestly, Alex, real estate hasn’t really been my investment vehicle. I’ve done it in the past, actually, back in before what we call the housing bubble, or the financial crisis of 2000. I was on the good side of that, and proud of it. Overall, no one still won. But you know, but definitely was able to have an experience that was in some ways, my first form of will say bigger ticket, entrepreneurship, much like yourself at eight, I was pretending to be a business owner. I was, you know, there was a golf course near my parents house. I used to go find golf balls in the ponds and streams and go sell them on the tee box and stuff and Heck, yeah, yeah, I did a lot of different shit growing up. I also did a business where I painted the address numbers that are painted on. I did that for me, that was actually pretty lucrative. We made a couple of bucks today doing that. Pretty part time too. But yeah, so but the But owning actual real rental properties was great. And I think this is a pretty cool way. Now I gotta be honest, I wasn’t even. I’ve heard 1031. Now that we’ve gotten into it, I’ve talked to some people about it. And, you know, I’ve heard of it. I wasn’t really sure of how it worked. I’ve become pretty well versed with opportunity zones, which is kind of a similar concept.
Alex Olson 14:41
Yeah. Mainly because I’ve had clients that you know, so we specialize in 1031 exchange, that’s obviously why our name is Xchange CRE.
Matt DeCoursey 14:50
There’s a link for that in the show notes people.
Alex Olson 14:53
Yes, check it out. But there’s a lot of sellers that we work with, they’re like, hey, look, I’m at the end of my wit’s here with this property, I don’t have to sell it. But sure, if you bring me a great offer, let’s sell it. And I’ll probably consider doing a 1031 exchange into, you know, something that’s more passive. And we’ve had clients that go kind of the opposite, like the route that you’re talking about where they go invest into an O Z fund, and opportunity’s own fund with those proceeds. And we definitely can help people steer the right way in there, as we talked about on the show, it’s a little bit, in my opinion, of course, because I’m not an expert at nosy funds, but it’s more dangerous, because you have to rely on an expert developer to you know, really prove that you can get some income on it, because it’s not all about deferring your capital gains, if you’re not making an income.
Matt DeCoursey 15:51
I made that comment earlier. I mean, those are already like, you know, those are already dicey areas, you know, and now with that, though, there are some that I think are almost like lay down beds, too. Like there’s some really good opportunity zones. And I don’t like to talk about local stuff, because we have more listeners outside of Kansas City, but like, well, Martin city, and you know, like that’s, and that’s actually grown because of some of the businesses that are there. There’s some big tech businesses and you know, with that some big barbecue restaurants open because we love our barbecue. And by the way, Kansas City Barbecue has the bass. I saw an article recently in St. Louis trying to say that and I wouldn’t hear. Yeah. But you know, with that, you know, there’s been some areas like the office that I’m in right now, where the Startup Hustle studio is in an opportunity zone, which is the downtown area of Kansas City, Kansas. That’s right, people. Kansas City is in Kansas, and Missouri, I blow people’s minds with that the Kansas City Chiefs plan Missouri, someone listening, you’re like, wow, they’re looking at a map. It’s true. You don’t even need to look at a map. I’ll tell you. It’s true. Yeah, but there’s some areas and I think that, you know, like, I think you made a point in the beginning, you said why didn’t make money quickly, real estate isn’t usually like that. It’s not a you know, that’s and that’s part of why it hasn’t really been my thing, because I don’t have the patience to wait 10 years, you know, I have ADD 10 years is like an add years is like 60 years. Yeah. Yeah, that doesn’t really go but with that, I think, you know, real estate in general can be real, if you’re willing to do a little work and a little hustle. Now, maybe a 1031 isn’t the right thing. But you can buy a rental home and what you meant, you know, my first rental homes were homes that I lived in, yep. And I just didn’t sell the home that I lived in, I rented it out after I moved to another one. And Zach can actually create a kind of a mechanized series of leverage along the way, which was what got people in trouble. But if you do it right, you can, you know, you basically gain enough equity in one property to leverage that into another, and another and another and another. There’s one thing with real estate, you have to pick winners, you have to pick things that people want to buy or will generate revenue. And some of these things like this is the issue on the flip side of like, the opportunity zone stuff. Some of those things are fucking money pits, man, like, I mean, so you can buy a building for $1. And a lot of places and people are like, Whoa, I Where do I get a building for $1? I like a lot of places, but it’s probably going to cost you like 2 million bucks to actually make it serviceable. So what appears to be a good deal can also just be very, very treacherous, and a lot of ways to.
Alex Olson 18:56
Yeah, you hit a lot of nails on the head through that conversation. Because there are so many people that try to swing for the fences in real estate, when they first get started, they’re gonna hit a home run, right? It’s like, I don’t care if I’m doing something, I’m gonna go full bore and hit this thing as a home run. And there’s people that I know that yeah, they bought buildings in bad areas for $1 and then have some tenants in there and oh, by the way, six months later, the building catches on fire. And heaven forbid somebody passes away in that I mean, are you kidding me? That’s going to mess up your life for a long period of time. And you got to do things the right way. Now what you can do in that situation is 1031 exchange out of it you hate that freakin investment you made you made a horrible decision, you can 1031 exchange that into a better decision. Maybe it’s instead of buying a 100 year old building for $1 and putting 2 million into it, maybe now then you’re doing it. Taking a 90 Well, sorry, 2020, building a 2020 building and putting 2 million or you know, you bought that for 2 million bucks. And you actually have some cash flow, and maybe it’s a lot more passive. So there are so many different ways to lose money in real estate.
Matt DeCoursey 20:21
It’s your money stuck to yes, that’s something I want to talk a little bit more about right after I remind everyone that finding expert software developers does not have to be difficult, especially when you visit FullScale.io where you can build a software team quickly. And affordably you can use the Full Scale platform to define your technical needs, and then see what available developers testers and leaders are ready to join your team visit FullScale.io To learn more, you know, speaking of of, you know, part of what my business does, which is we’ve created expertise around finding and identifying and assessing people with high levels of technical talent skill. I mean, I think before you dive into anything, it’s probably good to develop a little bit of expertise and not Well, I think you got to learn. I’m often a big baseball fan. So you have to learn how to not just swing at every single pitch that comes in, there’s a lot of real estate for sale out there.
Alex Olson 21:21
Mm-hmm. Yeah, I mean, you walk down the street, especially in certain areas, no matter what town you’re in. And there are properties, it might not even say they’re for sale, but they’re definitely for sale, like Please, somebody buy this thing. And you got to do your due diligence on that property. You can’t just go in there and say, like the bones of this thing. You have to have a plan, you have to understand where you’re going with it. And there’s different personality types. You know, talking about being an entrepreneur in real estate, where you can fit into that doesn’t matter. You mentioned you got ADD, you mentioned, you know, a lot of people that want something where it’s maybe a little bit faster to return on their money, there’s still a lot of different ways to do that in real estate. You know, it’s picking those that fit your personality. I had a CEO friend of mine that was not great at real estate, because he wanted fast returns. And so he partnered up with somebody and said, Hey, look, I you know, there’s no way I can do this long term real estate thing. Here’s some money. Make me some money out of this thing. I know you’re a long term guy. And so there’s a lot of people that actually shell out their money that’s available to them, and put it into real estate, different vehicles. You talked about opportunity zones. There’s also, you know, tenancy in common types of assets. And then you can also do syndications, right, you can put 50,000 $100,000 into syndication. And that syndication might, you know, promise or hope to get you eight to 10% on your money. And you’re still in the real estate game, at least in that business. Because you’re owning a piece of that pie. So there are all sorts of different ways. And then oh, by the way, when they sell, there’s 1031 exchange opportunities for you out there. So even if you’re in real estate, and you’re passive, you still got to know a lot of the lingo. So you can put your money with smart investors and have it there for the long term.
Matt DeCoursey 23:24
Even if you’re hoping for some short term game, what’s the biggest mistake investors make when attempting a 1031?
Alex Olson 23:28
The biggest mistake may not tell you if you love baseball, I love baseball, is swinging for the fences on that 1031 exchange. If you’ve got a couple $100,000, they’re going to be taxed heavily. If you don’t replace this property that you sold, you’re paying a lot of money. And so people get into that 3435 40 A day of identifying, and they’re still looking for that perfect property that doesn’t exist, by the way. They’re making a lot of mistakes at that point. And, you know, so the thing I always say is, when you’re doing a 1031 exchange, you don’t need to hit a home run you’re already taken a property that you either don’t like or made plenty of money on. And so now then your next step is to go out and find something that you make more money on and or you like more if you do that you win in real estate about winning, not hitting home runs. And that is so important. And we have so many people that come to us at the last minute and say, hey, look, I can’t find something that gives me 20% year over year returns. And I said yeah, I know you can’t find it because they don’t exist. So I mean, it’s very important that people understand that deadline. And understand that. You don’t have to go out and look for the same results you got when you bought This property because maybe you were getting 20% on that property when you bought it 20 years ago, but you’re selling it for a reason. And now it’s a different world. And you just need to make sure that you win not, not that you hit a homerun.
Matt DeCoursey 25:15
So I got another definition here. And it’s referring to a Qualified Intermediary, so Qualified Intermediary as a person or company that agrees to facilitate the 1031 exchange by holding the funds involved in the transaction, until they can be transferred to the seller of the replacement property, the Qualified Intermediary can have no other formal relationship with the with the parties exchanging property. So is that the same as a buyer’s broker? Or is that different?
Alex Olson 25:47
Yeah, no. So that is completely different. The Qualified Intermediary is somebody that you just said in the definition, holds the funds, so you never touch him. You’re literally never touching those funds, when you sell your property on one to one main street, and you’ve got a million dollars in equity that you’re gaining from that sale. The Qualified Intermediary holds every dime of that fun, and there are guys and gals out there, that’s all they do. And you know, some of them probably put it in some kind of short term investment fund, although I don’t know how there’s different things with that there might be some interest bearing on that, they charge a couple of 1000 bucks per transaction, but that’s all they do is protect your money. So there definitely is some, some trust that needs to be there with a Qualified Intermediary. A lot of the title companies will have somebody that’s built-in to do that. Some of them are a big pain in the ass. But the title company does have the bigger ones. And anybody can be a Qualified Intermediary, though, like you just said, as long as they don’t have a formal relationship with you prior. But I wouldn’t trust anybody to do it other than you. They’re somebody who the title company recommends, or somebody who somebody like myself recommends that can handle and that Qualified Intermediary can be in any state. So you might have a great Qualified Intermediary in Florida, that does all your work in California. And that’s totally acceptable and accepted. Because again, this is all a federal statute, you know, it’s an IRS guideline.
Matt DeCoursey 27:28
Can you give a good example of the use seen of someone leveraging a 1031 exchange?
Alex Olson 27:34
Yeah, so I have my favorite example. And I was actually just posting about this on LinkedIn, where we had a client come to us, they weren’t a client yet. But they found us and said, Hey, look, I’ve got this property in San Francisco Bay, used to be my rental, or my home 10 years ago, I’m going to sell it for a million bucks. And I want to buy something in Kansas City that has cash flows. So they took that million dollar property that had no debt on it. And they sold it. And we guided them on finding their Qualified Intermediary. And then we went out and found them 32 units here in the Kansas City area that they were able to invest in. And so they took their one unit that they were renting for $3,500 a month, and turned that into something that they were renting for $40,000 a month. And they were able to cash flow around $80,000 per year, whereas prior they were cash flowing some around $24,000 per year. So they did what I call the best one of the best things you can do for leverage. And these were basically accidental investors, right? They lived in this house, you know, many years ago, turned into a rental and never did anything with it. And now then they’re passive. I mean, they have a property manager they have to manage, but they’re passive here in Kansas City. cash flowing, you know, $70,000 a year was something that they bought 10 years ago.
Matt DeCoursey 29:17
Is that part of what you help people plan and do in Xchange CRE?
Alex Olson 29:22
Yeah, that’s exactly what we help. Right? So we’re going to help people that say, Hey, look, I’ve got a property I’m selling. We help identify, we help them with a Qualified Intermediary. We help them with property management, we help them with attorneys. If they need it, we can coach them on the Kansas City Market. What are the great areas to invest in? What are the bad areas to invest in? So we’re basically, I mean, we are a real estate brokerage firm. And on the commercial side, meaning something that’s more typically more than four units, and we’ll help them, we’ll search high and low, we have relationships with sellers we also do cold calls Link? Well, we’re finding them a replacement property and how we make money, typically the seller is going to pay the real estate commission to our firm on that transaction when it closes.
Matt DeCoursey 30:14
Well, I always like to talk about having experts. And I think that, you know, as I’ve gotten a little bit older, I’ve learned to really lean on experts, which has also been so much to do with, I mean, similar to what you’re doing with advising people on 1031 exchanges. I mean, that’s kind of like what we do at Full Scale. So last reminder, if you need to hire software engineers, testers realtors, let Full Scale help. We have the people and the platform to help you build and manage a team of experts. When you visit FullScale.io. All you need to do is answer a few simple questions. And then you let our platform match you up with a fully vetted, highly experienced team of software engineers, testers and leaders. At Full Scale. We specialize in building long term teams that work only for you to learn more at FullScale.io. The power of the platform, you know, as we’ve been having this discussion, Alex, I’ve been looking at your site, and there’s a lot of stuff going on. And so you guys have a marketplace on there that is the intent of that to help 1031 transactions find other needed 1031 partners.
Alex Olson 31:25
Yeah, so the purpose of our marketplace, it’s an off-market listing, so to speak, we don’t call them listings, because we’re not listings, we don’t have a listing agreement with the seller, but they’re off-market opportunities for people in a 1031 exchange deadline or not, you don’t have to be in a 1031 exchange deadline to be an investor want to find great deals. And so we have this whole members-only place where you can look at multifamily opportunities that are going to be exclusive to Kansas and Missouri, that are going to be cash flowing opportunities for people on a 1031 exchange deadline. And anybody can sign up, we have a quick consultation and talk with them, you know, talk with them about what their needs are, and, and maybe where they want to go. And we continue to put properties in front of them. We talk about, hey, look, here’s why we think this one might be a good property for you. Sometimes you have clients come to us and say, Look, I saw this property online, you know, on the market. I mean, what do you think of it? And you know, sometimes it’s a great buy. And sometimes, you know, we have something similar that’s maybe a better buy. So yeah, our marketplace is open to anybody that wants to buy investment real estate. And similar to what you’re talking about with your company, you know, we love people to go in there, get in there, sign up, and, you know, start the process.
Matt DeCoursey 32:45
So as we come to, as we prepare to run out of time on yet another episode of Startup Hustle, I like to end my episodes, you know, oftentimes with what I call the founders’ freestyle, which is founder-to-founder advice. However, I think we can pivot that a little bit. And you know, oftentimes in startups, the favorite move as the pivot, I mean, what’s some advice that you can give to just people that want to explore real estate entrepreneurship? And you know, I mean, I think there’s a lot of people out there, though, okay, really want to do it? I mean, what I mean, and let’s, you know, maybe, maybe it’s fine to have a long-winded answer here. Because I know, that’s a pretty broad question. But, like, if I want to get started with all this, what’s the best way to go do that? And maybe some, you know, little couples do’s or don’ts.
Alex Olson 33:43
Yeah. So that. I mean, that is a great question. And I think a lot of people are interested in real estate but maybe don’t know how or think they can’t. Right. So the first question I would think most people would ask is, why don’t you have any money to do that? How do I do that? And there’s an amazing book out there that Brandon Turner row, who is an executive with bigger pockets, website, which I also recommend. So two things I recommend out of that statement is to go to biggerpockets.com. It’s all about real estate investing, from single-family homes to commercial too, you know, rentals and Airbnb and all those kinds of things. The other thing is Brandon Turner’s book, you know, talks a lot about, you know, how to invest in real estate with no or low money down, meaning you do not have you don’t have to put a ton of money into this thing to get it started. And so that’s the biggest hurdle. How do I get started? I don’t have any money. Well, you actually do have money similar to what I talked about right in your home equity line of credit. You might even if you bought it three years ago, you probably have a lot of equity that’s in there that you could tap into. You might have a saving where you’ve got 20,000 bucks in it, and you’ve got a friend that also has $20,000 in it. And you can use that for $40,000 to buy a $200,000 property in a lot of markets. And so those are a couple of starter starting points. And also, obviously, you can reach out to me even though we work a lot with 1031 exchange clients. We also work a lot with new investors that want to invest in real estate. And there are all sorts of ways you can do that. And I’m happy to provide a kind of starter guide on how to get started. But the biggest hurdle is actually doing it, right, you’ve got the mindset, okay, I’ve got, you know, 50 $100,000 that I can tap into somewhere. And I’ve got some properties I like and a location I like, but I just can’t get over the hump of actually doing it. Because there are all these perceived risks, which don’t get me wrong, there is risk in real estate. We talked about this at the beginning, right in 2008, before and after, you know, the financial bubble, etc. And the hardest part is actually pulling the trigger. And I think if you look at people who invest in real estate for the long term, especially in multifamily, I don’t know of many, if any, that have said, You know what, that was a stupid decision that I bought a duplex at a reasonable price five years ago. Most people, yes, they might have hated that they, you know, had to do some toilet work and clean some faucets and stuff like that. But when they go to look at how much that duplex, or five Plex or whatever, is actually worth now, they are very happy, they did that. And there are all sorts of ways to overcome those objections. In your mind, the biggest thing has a decent agent. So make sure you have a real estate agent and don’t think that you don’t need one. And I’m not saying that just because I’m an agent. I’m saying that from experience, before I was an agent, there are so many little things that they can help you with, especially on your first transaction. And so, finding a great real estate agent in your area that likes to work with real estate investors is of absolute importance. Don’t use your friend, your mom, or your best friend unless they’re actually an investor in real estate themselves. I know I’m kind of rambling here, but there are a lot of different opportunities out there. For someone who wants to get started, the biggest hurdle is just doing it. Find a duplex you like, offer on it, find an agent that helps you offer on it, close it out, go through the process, learn those processes, and manage that property yourself or have your uncle do it or whoever’s local and see how things look after a year or two and decide if you want to do it again.
Matt DeCoursey 37:57
Yeah, I think that you know, I’d normally do the freestyle or give it to the guests and close out the episode. I think that you know, Alex, you gotta just do it. You need to get started on doing it. I think the number one thing that people do is, oh man, if it’s anything from writing a book to starting a business to whatever, you got to just do it at some point. The perfect time never arrives. In fact, in my book, I wrote about the right time myth because the right time never really comes. And if you find yourself saying that a lot, you are probably succumbing to the right time myth, and you know, there are times that are better than others, but the right time is usually not a thing. I think that so many people are sitting on hundreds of 1000s of dollars of home equity, especially you know the if you’ve owned a home for a while you know you’ve seen prices Signet I mean I’ve been subjected to that; I get a shitload of home equity myself. And you know, there are hidden ways to tap that money. I think that home equity is a bit of a myth as far as It’s like hidden, unused wealth, like you can leverage it to do a whole lot of other things. Make sure you know what you’re doing. I think Alex is hitting the head on finding; if you’re trying to buy real estate for purposes of investment, find a broker or an agent that understands that because I think it’s a lot different than just buying a home. Commercial real estate is also a lot trickier of a prospect than just buying single-family homes. So figure it out, people, and you know, there’s a link in the show notes to Alex’s business there is. They have quite a few experts there themselves. Alex, thanks for joining me, man. I’m gonna catch up with you down the road.
Alex Olson 39:51
Awesome, man. I really appreciate you. Being on your show is a lot of fun. Yeah, man.