Charities: How You Can Cash In on the Gift of Real Estate
Charities: How You Can Cash In on the Gift of Real Estate
It's a strange idea, an unusual way to do business.
But, hey, real estate professionals aren't the most conventional people on earth anyway. So read on to find out how you can be charitable (it is the holiday season) and turn a profit, all in a day's work.
First, consider this: Charities and nonprofit institutions, such as colleges, hospitals, and universities, often have residential and commercial properties to sell that were donated by people eager to be philanthropic and gain tax benefits. These property listings are often lucrative for those involved in the sale, including the real estate salesperson or broker.
As a recent study suggests, donations to charities and nonprofit institutions are on the rise. Last year alone, more than $162 billion was donated, $40 billion of it in real estate, according to the National Committee on Planned Giving, Indianapolis.
Barbara Yeager, a spokeswoman for the committee, says the number of real estate gifts donated to the nation's nonprofit organizations continues to grow each year ''as people become more familiar with gifting strategies and tax benefits.''
So how does that help you in your business?
''Not-for-profits sometimes have an inventory of property they've received through gifts, and they don't know what to do with it, so they don't do anything,'' Yeager says. ''Whenever property is transferred, broker services are needed to sell the property.''
A Special Specialty
Chase Magnuson, CCIM, of Beitler Com-mercial Realty Services, Los Angeles, has been listing and selling real estate for nonprofit organizations for the last three years. In fact, he has made that his specialty.
''The whole area of real estate [as a donation] is exploding so quickly,'' he says.''Brokers can get residential and commercial listings from charities. There are homes up to $6 million that have been donated.
''From the commercial salesperson's standpoint, since there are different specialties, there's the opportunity to lease office and storage space for charities,'' Magnuson adds. ''There's the tenant rep side of the business. There's asset valuation because each one of the donations that come in needs to be valued. If they [the charity] hold it for a period of time, it may need another valuation, and that's a fee-driven assignment for a broker.''
In addition, a property manager can benefit when a charity decides to hold on to a property that requires management.
Cynthia Steiger, a consultant to nonprofit organizations and a former commercial leasing specialist, says practitioners interested in this line of work must understand the tax benefits associated with planned giving.
''It's very unusual to meet a residential or commercial real estate specialist who has a grasp of nonprofit issues and real estate donated to charities,'' Steiger says. ''One of the reasons it would benefit real estate people to understand this area better [is that] when people donate assets to a charity in stocks, bonds, or real estate, there are substantial tax benefits'' for the donor.
Fred Stecker, an executive at the Muscular Dystrophy Association, says the MDA continually works to establish ties with practitioners across the United States, from salespeople to appraisers.
''Sometimes people make a gift of property because they're at a stage in their life where they no longer need it, and they feel a gift of property is a good way for them to support the association,'' he says. ''In those cases, we work with real estate professionals in whatever part of the country [the property] is located to help us appraise the property. If we do accept it, we work to sell the property so that we can turn it into dollars that will then be applied to supporting our programs.
''Oftentimes we'll call our local field staffs and ask them whom they've worked with in that local market . . . and we'll go with their recommendation.''
Magnuson says he's currently trying to sell a portfolio of properties--an apartment complex and a piece of vacant land valued at a total of $3 million--held by a California charity. He's also seeking to liquidate 146 acres on a mountain lake--a $1 million gift--in New Mexico and a $1.3 million trailer park in California.
''I can find specialty people who deal specifically with mobile home parks to join with me to market the property,'' he says. ''I'm a clearinghouse for the charities.
''A church might give up a $5 million ranch it's using for a retreat. If they [church officials] decide not to use it for that any longer, the government says they have to sell it. The potential for business for brokers who are actually talking to those folks is just gigantic.''
And the potential profits cross global lines, too. If a property in Brazil has been donated to a nonprofit organizationin Wyoming, for example, brokers from both countries can team up to get the real estate listed and sold.
''National charities can have real estate gifts all over'' the world, Steiger says. ''Not-for-profits are very unfamiliar with real estate, and some are scared to death'' to deal with it.
''Broker services are definitely needed in this arena.''
How to Tap the Market
Commercial real estate opportunities grow each year in the charitable market sector. Wondering how you fit in?
Consider following Cynthia Steiger's advice. A former commercial leasing specialist and a consultant to nonprofit organizations, Steiger urges real estate professionals to make themselves knownto planned-giving officers in nonprofit organizations. She also suggests attending seminars on donating strategies and their tax implications for donors.
In addition, Chase Magnuson, CCIM, of Beitler Commercial Realty Services, Los Angeles, advises practitioners to become involved in local college or university alumni associations, local churches, and community services--not only to network but also to volunteer.
''It's a two-way street,'' says Magnuson. ''While there's the opportunity to make money, we real estate people . . . should be donating time and be on different boards. That's the way we learn what's going on in the industry; it's a quid pro quo.''
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