3 Questions Every Realtor Should be Asking Their Landlord Clients
Prospecting should be a big part of your daily real estate life. New clients will bring new life to your pipeline. And with new opportunities, great customer service, and a little bit of luck, more referrals will follow as a result. When prospecting potential landlord clients, we suggest using these three questions to help you secure the listing and solve the landlord’s most daunting problem–the tax liability after the sale. Here are three questions to help you win the listing:
1. What are your 1031 exchange plans?
This question alone will help you win the listing from their favorite realtor, even if that realtor is a family member. It will help you establish your expertise as an experienced agent and communicate to the landlord that you know what you are doing and how to do it the right way. Most residential agents don’t know enough about 1031 exchanges to help a landlord decide if they should sell now. If the landlord is approaching retirement and is tired of the Triple-T-Monster (tenants, trash, and toilets), most would sell now, but typically they don’t because they are unaware of a solution to their tax liability problem: capital gains taxes, depreciation recapture taxes, and Net Investment Income Taxes (NIIT). This question helps them explore a 1031 exchange as a valid solution.
2. What resources do you need?
To effectively conduct a 1031 exchange, the landlord will need help from many people.
First off, you: the listing agent. You will help them list their property and find a replacement property on the back end of their exchange.
Next, a CPA will help them understand the implications of doing, or not doing, a 1031 exchange—and we would suggest having a few CPAs you like working with on speed dial just in case they don’t have tax help.
Lastly, a Qualified Intermediary, often called a QI or Accommodator, will help conduct the exchange and answer the 1031 questions that your landlord client might have. The QI will outline the process and help your landlord clients feel comfortable with the process. You can find a QI near you on the Federation of Exchange Accommodators website: www.1031.org.
3. What are your portfolio goals?
Knowing this will help you better understand their vision and you will be able to cater your help based on their wants. When doing a 1031 exchange, the taxpayer, or your landlord client, will need to do a like-kind exchange, or sell one investment property and buy or exchange into another. Your network will help you solve this problem. If they want to sell a duplex and buy a VRBO, vacant land, or a Tenant-In-Common interest from Millcreek Commercial, you can help guide them down the path that suits them best.
Knowing how to navigate these questions upfront will help open doors, making you a great resource for your clients. There have been many times when our team has been on phone calls with landlords who were caught with a vacant rental thinking that they didn’t want to sell, and ended up selling because their main problem was solved: deferring taxes with a 1031 exchange. Cold calling landlords is now a gold mine!
At Millcreek Commercial, we help each of our investors enjoy monthly passive income by co-owning premium commercial real estate that is both recession-resilient and fully managed. Let us help you and your clients. Visit us at millcreekcommercial.com for more information.
