GlobeSt.com: How is it different to be on the buy side exclusively rather than on both the buy and sell sides?

Cline: I would say there is more time involved in the buy side and more opportunity because there are very few exclusive buy-side agents in this industry. When searching for replacement properties, there are no limitations. Clients want to know what product is available and where, which is a very time-consuming task. I review about 1,000 properties a week, something listing agents most likely do not have the time to do. As an exclusive buy-side representative, it is my duty to locate and acquire the best deal for the buyer. It also takes time to educate these buyers on estate planning, tenant qualification, cash flow, loan qualification and so on.

GlobeSt.com: What are the different types of 1031 exchanges?

Cline: There are three types of 1031 exchanges: delayed, simultaneous and reverse. A delayed exchange is the most common 1031 exchange. Here the client has 45 days to declare his replacement property and 180 days to close. In a simultaneous exchange, the replacement property closes at the same time as the relinquished property. In a reverse exchange, the client acquires the replacement property prior to selling the relinquished property.

GlobeSt.com: What else should our readers know about 1031 exchanges?

Cline: The concept of a 1031 exchange is fairly simple, but the intricacies can be very complicated. The most important thing in a 1031 exchange is to ensure hiring experienced representation to take you through the process step-by-step. The sooner the buy-side representative gets involved in the 1031 exchange, the better. This helps to avoid timing problems that may cause desperation, resulting in a large tax bill or acquiring an undesirable asset. I have seen investors make mistakes in their exchanges that result in having to pay millions of dollars in income taxes.

My obligation as a buy-side representative is to go above and beyond the expectations of the client. Our team felt like it was of utmost importance to have representatives on both sides of the deal to truly provide the world-class service that CBRE offers to our clients.

NEWPORT BEACH, CA—From timing to types of exchanges to being on the buy side, there's a lot involved with 1031 exchanges, CBRE's Greg Cline tells GlobeSt.com. Cline was brought on as an exclusive buy-side representative earlier this year by the firm's Net Lease Property Group—Newport. He has been in the commercial real estate business for 42 years and has successfully completed hundreds of 1031 exchanges throughout his tenure. We spoke exclusively with him about the ins and outs of 1031 exchanges.

GlobeSt.com: How does the timing work on a 1031 exchange?

Cline: A 1031 exchange is a method that investors use that allows them to defer taxation on the capital gain of the sale of a qualified investment property. The two key terms to know when discussing a 1031 exchange are the relinquished property, which is the sold property, and the replacement property, which is the purchased property. From the time a client closes escrow on the relinquished (sold) property, they have 45 calendar days to identify the replacement property and 180 calendar days to close escrow.

There are two common methods for identifying a replacement property: the three-property rule and the 200% rule. If choosing the three-property rule, the client can identify three replacement properties. The client must close escrow on one of the three properties within the 180 calendar days. Alternatively, the client can identify as many replacement properties as they want, with a combined value of up to 200% of the sales price of the sold asset.

GlobeSt.com: How is it different to be on the buy side exclusively rather than on both the buy and sell sides?

Cline: I would say there is more time involved in the buy side and more opportunity because there are very few exclusive buy-side agents in this industry. When searching for replacement properties, there are no limitations. Clients want to know what product is available and where, which is a very time-consuming task. I review about 1,000 properties a week, something listing agents most likely do not have the time to do. As an exclusive buy-side representative, it is my duty to locate and acquire the best deal for the buyer. It also takes time to educate these buyers on estate planning, tenant qualification, cash flow, loan qualification and so on.

GlobeSt.com: What are the different types of 1031 exchanges?

Cline: There are three types of 1031 exchanges: delayed, simultaneous and reverse. A delayed exchange is the most common 1031 exchange. Here the client has 45 days to declare his replacement property and 180 days to close. In a simultaneous exchange, the replacement property closes at the same time as the relinquished property. In a reverse exchange, the client acquires the replacement property prior to selling the relinquished property.

GlobeSt.com: What else should our readers know about 1031 exchanges?

Cline: The concept of a 1031 exchange is fairly simple, but the intricacies can be very complicated. The most important thing in a 1031 exchange is to ensure hiring experienced representation to take you through the process step-by-step. The sooner the buy-side representative gets involved in the 1031 exchange, the better. This helps to avoid timing problems that may cause desperation, resulting in a large tax bill or acquiring an undesirable asset. I have seen investors make mistakes in their exchanges that result in having to pay millions of dollars in income taxes.

My obligation as a buy-side representative is to go above and beyond the expectations of the client. Our team felt like it was of utmost importance to have representatives on both sides of the deal to truly provide the world-class service that CBRE offers to our clients.