The number of options available for replacement properties can be intimidating; what advice does one of the sector’s leading experts have for those interested in a 1031 exchange?

Through JTC’s decades of experience as a 1031 Qualified Intermediary, we’ve had the opportunity to work with a number of industry-leading companies. When our clients are in need of additional services related to 1031, we strive to recommend the best, and we’re always eager to learn from those with a helpful perspective on the industry. Today we’re highlighting one such associate, RCX Capital Group, which has proven to be a source of immense knowledge when it comes to 1031.

Founded in 2001, RCX Capital Group, LLC, a registered broker-dealer and FINRA member, is a real estate investment and merchant banking boutique that provides capital raising and advisory services, along with tax-advantaged wealth transfer solutions. The firm is a leading sponsor of securitized 1031 exchange private placements and Delaware Statutory Trusts (DSTs).

RCX Capital Group and JTC Americas (then NES Financial) met in 2019 through a mutual family office relationship. Both firms are among the most active in the DST space and are like-minded in their efforts to create and embrace technology. By using cutting-edge technology, JTC Americas and RCX Capital Group have been able to facilitate 1031 exchanges for their clients at scale while enhancing the client experience. JTC Americas has embraced the product agnostic approach of RCX Capital Group, who has in turn embraced JTC America’s suite of services.

We recently spoke to RCX’s Levi Smith about how the company helps its clients perform 1031 exchanges, the importance of an experienced Qualified Intermediary, and advice for anyone seeking to perform their first exchange.

Can you explain for our readers what RCX’s role in a 1031 Exchange is, and how your clients become interested in performing an exchange?

Smith: RCX helps individuals who need to defer capital gains, which can be related to the sale of real estate, a business, stock, or another interest. In the case of real estate, tax deferral is achieved by performing a 1031 exchange into one or more replacement properties. With the sale of a business or stock, tax deferral is achieved by investing in a Qualified Opportunity Zone.

In each of these scenarios, once an asset is sold, you need to find a replacement asset, and RCX’s role is to help our clients source high-quality real estate from best-in-class sponsors who strive to generate attractive risk-adjusted returns. Additionally, RCX is able to facilitate the entire education, transaction, and reporting process online through a proprietary technology platform.

Do most clients come to you already knowing what a 1031 Exchange is, or do you have to educate them?

Smith: We strive to meet our clients where they are and educate them as necessary so they can make the best decisions. Many clients understand broadly what a 1031 exchange is, but we help educate them on the specifics, as well as the different types of investments eligible for deferring tax liability, which can include DSTs and Opportunity Zones.

Together We Learn

Not too familiar with 1031 Exchanges? Read our 1031 Exchange Guide!

At what point in the process does the Qualified Intermediary come in? Is there anything useful you’ve learned about choosing a QI that might help our readers?

Smith: The QI should be engaged before the property sale has been closed because they must hold the client’s entire sale proceeds and distribute them in an orderly manner as replacement investments are chosen. RCX urges our clients to use best in class, reputable firms who have ample experience in multiple complex structures and do not compromise on compliance. Complex ownership structures are common, and they require experts to facilitate.

What has your experience working with JTC been like? How does JTC differ from Qualified Intermediaries you’ve worked with in the past?

Smith: JTC is one of the premier 1031 QI’s in the country, with the best technology, expertise and client experience. Many of RCX’s RIA [Registered Investment Advisor] and FO/MFO [Family Office/Multi-Family Office] partners request referrals of two to three names, and JTC is always at the top of the list because of their sophistication and commitment to growth through technology.

When a person has a property to sell and wants to do a 1031 Exchange, what’s the best piece of advice you’d give or action you’d suggest they take?

Smith: I have two major recommendations: first, plan as far in advance as possible, as the outcome is generally better when all solutions have been evaluated. Second, get sound, objective advice from experts. Taking time to make sure you have the right solution for your situation is essential. Make sure the experts you work with understand the right strategies available to meet your objectives.

It’s critical to get the right people involved at the right time, and having a QI like JTC with a strong background in exchanges takes the guesswork out of a situation that could cost you thousands (or millions) of dollars in taxes.

Together We Grow

Learn more about our 1031 Qualified Intermediary Services by downloading our 1031 Exchange Solution Sheet!