Industry providers are as susceptible as anyone to falling for misconceptions about who can take advantage of 1031. One company is finding success by targeting investors who are often overlooked.
Some of the biggest challenges 1031 facilitators and others in the industry face are fighting misconceptions about the program and educating investors about the benefits and possibilities of participating in a 1031 exchange. There is a lot of misinformation out there, and a lot of stereotypes about the type of person this sort of tax-advantaged investment is for, resulting in many investors not realizing they could take advantage of this great program.
But just as property owners may miss out on 1031 because they think it’s only for the wealthy, service providers can miss out on opportunities as well. By only focusing on those who have traditionally performed 1031 exchanges, they miss potential clients who are eager to find advantageous investments but find themselves rarely targeted by educational campaigns.
We recently spoke with Mauricio Sanchez about how putting effort into these untapped markets can benefit everyone involved. Mr. Sanchez founded Sanchez & Rivera Title, the first Hispanic-owned title company in the United States, in 1995 with his partner Ron Rivera. The company’s focus is to provide services to underserved communities who’ve traditionally lacked representation, providing tools that can assist in the purchase of a home such as bilingual materials and service providers whose mission is to explain documents in a transparent manner and answer questions in the consumer’s language of choice. 26 years later, they work with a variety of clients from all real estate sectors and backgrounds, providing exceptional service while educating and advocating for the consumer on the process of becoming a homeowner and contributing to sustainable home ownership.
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One thing Mr. Sanchez has seen over the years is that everyone, regardless of their background, has the capacity to understand the benefits of a 1031 exchange – it’s just a matter of including them in the conversation.
The biggest misconception, he says, is that “only the wealthy are in tune to the benefits of the 1031 Exchange.” Companies who aren’t active in those communities may write them off unnecessarily, missing out on a growing potential client base.
“The 1031 Exchange is a tool that anyone from any background can benefit from,” says Sanchez, adding that awareness of 1031 “has grown moderately in the communities we serve,” but that “there must be more education provided by companies and the practitioners who work with real estate investors.” This can include materials in a variety of languages, which can help to tap into consumers who are only uneducated about 1031 because they’ve never been targeted.
“For example,” he adds, “The Latinx community in Chicago are major owners of investment properties with the benefits of renting and occupying buildings from 1 to 4 units.” If the industry doesn’t offer services catered to these property owners, they won’t realize the benefits of utilizing 1031 when they sell their investment properties.
Investing the same energy and resources that the industry has put into educating other groups would develop a customer base that is poised to grow. By ignoring them, the industry is losing out, which is why Sanchez sees so much potential in this space.
And for Sanchez, this isn’t just talk – the company is taking steps to make real estate transactions easier. In 2021, his group established a new company, S&RENITY, to assist consumers throughout the real estate transaction process so they can better understand elements that can feel overwhelmingly complex. In addition, S&RENITY is a resource and facilitator for services which include 1031 exchanges.
One thing Sanchez has learned is that it’s important to work with companies that share his vision, and collaborating with JTC Americas has helped his business to flourish because the company was open to his input.
“JTC Americas listened to our recommendations to create and facilitate methods to better serve our clients,” says Sanchez. “From creating bilingual 1031 Exchange materials in Spanish for the first time in our industry to educating our customers on the benefits of 1031 exchanges, they’ve supported our company’s mission.”
By making these communities a priority, Sanchez & Rivera are able to follow through on their commitment to social impact while developing trust within a customer base that represents a growing segment of the population. They’ve found an undervalued market and have faith that educating and assisting investors will pay off in the long run.
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Learn more about our 1031 Qualified Intermediary Solution by visiting our 1031 Exchange Page!