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A 1031 Exchange Interview

August, 2019
by Karl Niehaus, President, CREI

WELLS FARGO - a 1031 Exchange Interview:

For four decades, Rick Karl ran the show at Hollywood Dog Training School. Rick proved his mettle as a business owner during his four decades on the job, but as he approached the end of his career, he was met with a new set of challenges. Wells Fargo Works spoke with Rick about his strategies for navigating the transition into retirement.

Wells Fargo: What obstacles did you encounter when you first began thinking about retirement?

Rick:Succession was not really an option. Even though I had a good supervisory staff, I did not see that was the way I wanted to go. I was the face of the business. Without me, the business would have fallen away. When other people came to look at it, I knew they couldn’t do it. I’d always thought my business would be my retirement — the land, anyway. But I just couldn’t see paying the tax that would’ve been required on the sale. It came to a point where I was feeling a little bit trapped. This was a stressful time.

Wells Fargo: Who did you rely on to help you decide between different exit strategies?

Rick: There was a commercial real estate agent, Karl Niehaus, who had been coming into my business for over 20 years. He said to me, “Rick, have you ever heard about a 1031 exchange?” So he started explaining to me a little bit about the process, and it began to feel to me that now I had some tools, some information at least, that could allow me to consider this as an option. He shepherded me through it the whole way.

Wells Fargo: How did the 1031 exchange help you achieve your retirement goals?

Rick: With a 1031 exchange, you have to take the total proceeds from the sale of your property and put it into your 1031 property. I wound up buying a building with Golden Corral as a tenant. I have a mortgage that Wells Fargo gave. Golden Corral pays monthly rent, part of which goes toward my mortgage payments, and I live on the rest. I am making more now being retired than I did when I was working. And I have better write-offs. It’s turned out marvelous.

Wells Fargo: How have you been spending your retirement?

Rick: Right now, I'm working my little tail off.I’m still kenneling up in my ranch, and I take 2 dogs a month and train them. One of my key dog trainers has a facility that she’s building up, so I am in the process of really helping her continue to do that. I’m doing more than I did when I was working. I don’t need to do it. It keeps me active, and it’s exactly right. It’s what I hoped my retirement would be like.
 
A condensed version of this interview is published on Wells Fargo’s Website: https://wellsfargoworks.com

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