NNN Buyers Close on Last 4 Properties in 1031 Exchange, Earn Over $600K in Annual Income
An increasing number of business owners and commercial real estate investors are selling high-maintenance, low-return properties and using the 1031 exchange to purchase responsibility-free, income-producing, triple-net (NNN) lease investments.
The California couple in this success story is a prime example – wanting long-term, monthly income with zero responsibilities, they sold their plumbing distribution warehouse and purchased seven Dollar General properties within 180 days. Utilizing the 1031 exchange, they deferred all capital gains tax on the sale of their warehouse and now enjoy over $600,000 in annual income with no landlord responsibility.
So how did they manage to sell one property and identify and close on seven other properties in such a short timeframe while meeting the IRS’s strict 1031 requirements? With limited knowledge of NNN lease investing or the ins-and-outs of the 1031 exchange, they reached out to Chris Schellin, President and Buyer’s Advisor at Westwood Net Lease Advisors for help, and what happened thereafter was a whirlwind of investing success. They closed on their final four of seven Dollar General properties on August 27, 2020.
The Challenge: Defer Substantial Capital Gains Tax & Find $9M Worth of Quality CRE
When these buyers contacted Schellin, they were burdened with the problem of trying to defer a substantial capital gain tax on the profit from the sale of their warehouse. They were also unclear on how they would find enough quality NNN properties to invest the entire $9 million.
To assure them that their goals could be met, Schellin spent several months getting to know the buyers and their goals and educating them on the different NNN lease options and the investment process before they sold their property. Because they were prepared in advance, once their warehouse was under contract, the NNN property search moved forward expediently.
First set of Dollar General property closings:
Right away, Schellin located three Dollar General stores in slightly different geographical areas within Alabama, which made the investment package desirable for diversifying their property holdings based on location. Each absolute NNN lease still had just over eleven years left with five-year extension options, so the buyers’ long-term income requirement was met, and they achieved a higher than average cap rate.
On June 4, 2020, these cash buyers closed on the first three Dollar General properties totaling $3.4 million. (See that story here).
Second set of Dollar General property closings:
Simultaneously, Schellin located another four, off-market, pre-construction Dollar Generals direct from developers – two in South Carolina and two in Indiana. Contracting on a pre-construction in a 1031 exchange can be risky – if the couple did not close on the properties on the 180th day after closing on their warehouse sale, they would’ve had to pay capital gains tax and still be contracted to purchase those properties.
Schellin knew they could benefit from these properties, and since they were dealing with two reliable developers he’d worked with in the past, he was confident the timeframe would be met. And he was right!
They closed on the final store August 27, 2020. All four, brand-new properties have 15-year, absolute NNN leases.
To Wrap it Up – The Result: New NNN Investors Benefit from Long-Term, Responsibility-Free Annual Income of $600,000+
Had this new NNN investor couple not contacted Schellin when they did, they would not have secured this profitable set of seven Dollar General properties, nor would they have met the 1031 exchange rules, paying an exorbitant amount of capital gains tax.
Instead, as a result of Schellin’s representation, 100% of the profits from the sale of their warehouse continues to work for them, providing a healthy CRE portfolio and $600,000+ in responsibility-free, guaranteed income and annual tax advantages.
Chris Schellin and the team at Westwood Net Lease Advisors are known for making the best deals for their new and experienced buyers, ensuring they are educated and fully represented from the very beginning of the process to closing, at no cost to the buyers. For more NNN investment information and a free, no-obligation consultation, call or email Chris Schellin, President of Westwood Net Lease Advisors, 314-563-2208.
