Kim Ledger:
Welcome to Ren's Philanthropic Insights video podcast series, made to help financial advisors make the most of their client's charitable giving. I'm your host, Kim Ledger Ren's VP of Complex Assets, and this is my co-host and fellow expert on complex assets, Katie Collin. Katie is a Complex Gift & Grant Director here at Ren. In this series, we are sharing everything you need to know about making the most with gifts of complex assets.
Throughout this series, we are discussing the various areas of complex assets such as real estate, business interest, passion assets, alternative investments, and qualified appraisals. And we were bringing in some of the top experts in these fields. In this episode, Bruce Geist, the COO of Realty Gift Fund, will be joining us as we explore real estate donations. With thirty-two years of partnership and four decades each in real estate. Bruce and Jay Grab founded Realty Gift Fund, America's top provider of real estate gifts for non-profits. Before we get to Bruce, Katie, I got to tell you, I'm excited about this episode because we get a lot of questions about gifts of real estate, and so I know Bruce has a lot of great information for us.
Katie Collin:
Right, and they can be really difficult depending on the non-profit, depending on how things are set up, real estate gifts, and we'll dive into it with Bruce, can just be complex enough that you really need an expert partner to be able to make the gift come to fruition.
Kim Ledger:
I agree. I agree. Well, thanks Bruce for joining us today.
Bruce Geiss:
Thank you for having me.
Kim Ledger:
Yeah.
Bruce Geiss:
Good to see you both.
Kim Ledger:
So glad you're here. So just take a brief moment because I think this is relevant for our viewers to understand a little bit about you and Jay and how you guys actually got started with this. Just briefly.
Bruce Geiss:
Okay. Jay and I each started about four decades ago in the real estate business. What distinguishes what Realty Gift Fund does is it's founded by two hardcore real estate guys.
Kim Ledger:
Yeah. We appreciate that.
Bruce Geiss:
I was in construction and development, Jay was in sales. After a period of time, we finally met each other and I joined his firm, his sales firm, which became later rather quickly an investment firm. And so we were using our money and other people's money to buy and fix and build assets in a multi-state area, so that's how we all got started with the real estate part. And we did this for thirty-two years. Jay and I each had an affinity to the nonprofit world. We ran nonprofits as board members, we were advisors, we were consultants, and a unique thing happened with Jay when he was down in Dallas looking at some properties that were being sold by a nonprofit
And they kept answering the phone from people who were offering gifts of real estate, and they kept turning those offers down right on the phone without any evaluation at all.
Katie Collin:
Wow.
Bruce Geiss:
And that baffled Jay, so he came back and we had a little powwow. We got together, we did some research and we discovered that there was a problem with gifts of real estate entering into the charitable pipeline. From that, we decided to start our own nonprofit so that we could be the nonprofit that would say yes to gifts of real estate on behalf of all of those nonprofits, 1.3 million public charities that say no.
Katie Collin:
Which is so wonderful to hear. Bruce, I don't know if you remember the first time that you and I worked together. It was a gentleman who had a gift in the nonprofit I was at, at the time, just really couldn't figure out a way to accept it that would be cost-effective for the donor and really impactful with his ideas for giving. Can you talk to us a little more about why are nonprofits so hesitant when it comes to gifts of real estate?
Bruce Geiss:
Well, in order to allow a donor to make a gift and get a tax deduction for that gift, the nonprofit has to take title. Taking title to kind of any piece of real estate can be scary for a nonprofit.
Katie Collin:
Exactly.
Bruce Geiss:
And we are going to talk about some stories about how the simplest thing can go haywire in a very short period of time. Jay and I have owned, we've built, we've fixed. Real estate is second nature to us, and so none of this scares us. It's just the course of doing business, but to an outfit that's really, really good at what it does, pick any charity in America that's really good at what it does and has a fundraising team that is really good at what it does. They're still not real estate people.
Kim Ledger:
Right.
Bruce Geiss:
And that's why they just shy away from gifts of real estate and it actually migrates up to the board.
Kim Ledger:
Yeah.
Bruce Geiss:
Where the board has a policy that just says, look, we're not into the business of taking risk for our nonprofit, we're just saying no to everything that shows up. And most frequently they'll say to their donor, thanks for your generous offer. Please go sell your asset, pay your capital gains tax and give us what's left over. We see it a completely different way.
Kim Ledger:
What types of real estate make great gifts?
Bruce Geiss:
Well, actually anything that's marketable.
Kim Ledger:
Yeah.
Bruce Geiss:
We deal in land, we deal in farms, ranches, hotels, shopping centers, office buildings, lots of homes, subdivisions, resorts, restaurants.
Katie Collin:
Wow.
Bruce Geiss:
All kinds of real estate have value. Real estate is the largest asset class in America, and it's not being tapped as efficiently as it should be for charitable giving. That's the purpose for Realty Gift Fund to exist.
Kim Ledger:
And we've worked with a lot of high net worth and ultra-high net worth clients, or I guess I should say our advisors do, where real estate is a big portion of their overall wealth.
Bruce Geiss:
Exactly.
Kim Ledger:
So this is an important consideration for them.
Bruce Geiss:
If you're one of those high net worth donors and you get to a certain point in your life, you realize that you're entering into a period where you have to be aware of what your estate plan looks like.
Kim Ledger:
Right.
Bruce Geiss:
And how it is going to look when everything passes down to the kids. We've had donors who have come to us to say, look, I've got a nice portfolio of real estate, but my kids don't get along, they don't know a thing about real estate, they live in different parts of the country. It's the last thing I want to hand down to them. I'm happy to give them my cash and my stocks and all the other important appreciated assets that I have, but not my real estate because it's like riding a bull.
Kim Ledger:
Yeah.
Katie Collin:
That is a great analogy.
Bruce Geiss:
You need to get on and you need to know how to get off.
Kim Ledger:
Yeah, that's a great analogy. I'd have had people who-
Bruce Geiss:
Well, I thought it would be very appropriate for your Midwestern location.
Kim Ledger:
One thing that I can remember, somebody calling in and saying, well, we've got this piece of real estate. We haven't been able to sell it, and so we thought we'd just give it to charity.
Bruce Geiss:
Right.
Kim Ledger:
Well, and I think we've said this in every episode is that the donor advice fund is there to make grants to organizations, so that's the point of it, so if it's not cash, you're not making grants.
Katie Collin:
Right.
Kim Ledger:
So it needs to be a property that can be sold.
Bruce Geiss:
It needs to be a property that can be sold.
Kim Ledger:
Yeah.
Bruce Geiss:
We say no 20% of the time.
Kim Ledger:
Do you?
Bruce Geiss:
When we say no, it's a hard no. We know how to say no.
Kim Ledger:
Yeah.
Bruce Geiss:
Because we're professional at it.
Kim Ledger:
Right.
Bruce Geiss:
But largely nonprofits throughout America are saying no to gifts that they should say yes to.
Katie Collin:
Right. Well, I think the important point you raised Bruce is really that anybody can have this in their portfolio, and whether it's someone who has heirs who don't know how to manage it, or someone who may not have heirs to leave property to, it's really important that this can be a really great charitable asset in terms of gifting. And so having partner groups to help with turning that liquid is really, really important. When people are coming to you, are you finding that their gifts are going simply to one charity or are you and your team able to help direct gifts to multiple charities depending on the size of the property and the value that it can be?
Bruce Geiss:
The nice thing about Realty Gift Fund is we are pretty agnostic as to where the money goes, as long as it's to a legitimate nonprofit. We accept the gift, we take title, now we own the property and we fix it. We invest a lot of money in these properties to get them ready for the market, and then we hire a broker and a title company and crews to fix things, then we sell the properties.
Katie Collin:
Right. And I think what you said right there is important for charities because it's the owning it, and it's investing in it, and getting it ready for sale to make it liquid, to have available for granting. That's really the piece that I think is important for charities to understand. There's so much that goes into this before it becomes liquid, before you can make the grant with it.
Bruce Geiss:
Well, you're right, Katie. And the reason why that's important is that if a donor wants to support numerous charities with a single gift, and we have written grants to as many as 10 different charities after we have liquidated the asset.
Katie Collin:
That's amazing.
Bruce Geiss:
You've got to find a charity who's willing to take title, take the risk, make the investment, sell the property, accumulate all the net proceeds at the end, and distribute the bulk of the money to somebody else. And there are very few nonprofits in America who will actually do that. We will, that's what we do. So I would tell you that sixty-five percent of the grants that we make, we take title, we sell the property, and we've received the gift, and then we make a grant. Sixty-five percent of the grants we make go to donor-advised funds.
Kim Ledger:
Yeah. Which is how we know each other.
Bruce Geiss:
For a good reason.
Kim Ledger:
Yes, yes. To be able to make gifts over time. And to, yeah, exactly.
Bruce Geiss:
Right.
Kim Ledger:
We really appreciate it. What about residential properties that have tenants in it? Does that scare you off? I got to tell you, maybe you and I have talked about this before. I had a situation where we reviewed a piece of real estate. It was a duplex. And it hadn't been updated since probably 1974.
Bruce Geiss:
Right.
Kim Ledger:
And it had a tenant in it, and the complex asset committee said, no, they did not want to be a landlord, and the property needed a lot of work, so they passed on that. And it sounds like that is something that you would would've probably worked on.
Bruce Geiss:
We take that all the time.
Kim Ledger:
Yeah.
Bruce Geiss:
There's numerous ways to get around the fact that there's a tenant in a property and the property needs work. Excuse me. We're involved in two or three of those going on right now.
Kim Ledger:
Okay.
Bruce Geiss:
Residential properties that have tenants in them. We either have to wait them out, so we take title, now we own a property that has a tenant in it, and we get income. And we wait them out until their lease expires, and then when they are getting ready to leave, we send a broker in to evaluate what needs to be done. We put together a team, how much is it going to cost? How long is it going to take? And as soon as that tenant moves out, the very next day, we are at work. And we're typically on the market with a fresh property in about two weeks.
Kim Ledger:
Wow. That's amazing. That is amazing.
Bruce Geiss:
We do all the prep work up front, but I will tell you one of the most interesting things we did where the money actually went to rent is we had a tenant in a house and the tenant bought the house.
Kim Ledger:
Yes.
Bruce Geiss:
So we took the gift from the donor who had been leasing a portion of the home to a tenant, and she moved out on a Monday. We took the deed on a Wednesday and a week later we sold the property to the tenant who didn't have the money to buy it, but we provided seller financing, $950,000 deal. We took $250,000 down. We have are currently in the middle of collecting monthly payments on a $700,000 note. This tenant is going to buy this house, and it is another way to skin the cap when you've got a property that has a tenant in it.
Kim Ledger:
Yeah, that's another great story.
Bruce Geiss:
It was a fun deal to do.
Kim Ledger:
Yeah.
Bruce Geiss:
There were so many winners in that deal.
Kim Ledger:
Yeah, I love that story. Love it.
Bruce Geiss:
I love that story too. I mean, we actually have numerous great stories.
Kim Ledger:
Yeah. Do you mind sharing another one? I love stories, because I think this is just a great way for you to highlight the work that you're doing.
Katie Collin:
Right. I think it helps our audience understand how real estate can be a great gift. And for some of these that have interesting twists, those are the ones that someone might say, oh, maybe this isn't the right thing, but they're hearing you say, we've had a success with it. Oh, I can think of that now when I'm considering this for a potential client or future client.
Bruce Geiss:
Well, Katie, one thing we do tell all of the people that we do business with don't ever say no on our behalf when you're speaking to a donor, let us talk to the donor, find out what's really going on. We will say no if it is a no, but we will say yes when most people think I'm too embarrassed to even present this to Realty Gift Fund, so that should never happen. I do want to say by way of telling a short story that some nonprofits think that they should be able to be in the business of accepting gifts of real estate themselves. What's difficult about accepting a house?
Kim Ledger:
I'm laughing because I can tell you I've accepted those gifts. Yes.
Bruce Geiss:
So we accepted a gift of a town home in Broomfield, Colorado, right outside Denver. In between Denver and Boulder. It had been righteously turned down by the local community foundation, and the donor came to us and it was a simple home. We did have to do like $20,000 worth of repairs to it because it had been vacant for a number of years and things had gone south, so we brought it back up to date. We put it under contract to sell it, seven days before we were scheduled to close. There was one of those typical Colorado snowstorms that passed through heavy, heavy wet snow that turned to freezing temperatures at night, tore up the roof, sixty-five thousand dollars later.
Kim Ledger:
Oh my gosh.
Bruce Geiss:
We had to fix the entire place.
Kim Ledger:
Yeah.
Bruce Geiss:
And this is why nonprofits really should shy away, I think, from gifts of real estate because even something that looks simple, looks like an easy date, turns out to be a nightmare.
Kim Ledger:
Yeah.
Bruce Geiss:
And so we handled that. We have renovated so many properties in our career, it just was kind of routine to put together the 20 people that had to be hired to fix everything that had gone bad. And we actually talked the buyer who wasn't able to close, of course, on time, we convinced that buyer to hang in with us, and two or three months later, we had it fixed and that buyer bought the property. And it was pretty routine. But I wanted to tell that story as a way of saying to nonprofits, you should be accepting gifts of real estate. You should be asking for gifts of real estate.
You do not need to change your board policies, which say no to a gift of real estate because you should not go into the business of taking title to real estate, but you should accept the benefits of a gift of real estate from donors who are passionate about your cause, would do anything they could to support you, but would prefer to use their assets instead of their cash to make a gift.
Kim Ledger:
Yeah.
Katie Collin:
Right.
Bruce Geiss:
Which of course is the smart way to make charitable gifts these days, that's well documented. And just find a way to do it. And so third party specialized nonprofits who do this work are the way to go. It allows you to ask for gifts of real estate.
Kim Ledger:
Now, that reminds me of another question to ask you is about the benefits of making this gift, the avoidance of capital gains.
Bruce Geiss:
Yes.
Kim Ledger:
Assuming that the property has increased in value, so you avoid the capital gains and then you get the charitable deduction. Now, that charitable deduction, I get this question a lot. If someone is looking at what is that charitable deduction based on?
Bruce Geiss:
The charitable deduction is based on current appraisal, so when we do business with a donor, after we've met a donor who has said, I want to send all my money to a donor advice fund over at Ren, and we talked to this person about their real estate, and we get into contract. We say to them, the only thing you're going to spend money on is to get an appraisal. That is the basis of your tax return. 100%. We will pay for everything else. In the course of taking the donation, fixing the asset, we'll even make you a partial cash payment, which we should talk about here in a little bit, but we will take care of everything else. The tax deduction is the appraisal less any money that we send to the donor as a partial cash payment, which is called a bargain sale.
Katie Collin:
Bruce, do you want to close us out with one more really interesting story that's been kind of one of your favorites over the years that you can share with the audience?
Bruce Geiss:
We do partial interest gifts.
Kim Ledger:
Yes.
Bruce Geiss:
We love doing partial interest gifts.
Kim Ledger:
That is popular, is it not? Yeah.
Bruce Geiss:
Well, it is for certain assets and for certain people.
Kim Ledger:
Sure.
Bruce Geiss:
So there was a $7 million hotel in Punta Gorda, Florida last year. The owner wanted to, very philanthropic guy, made a gift to us of a 51% interest in the hotel, so now we're partners. He's got 49%, we have 51%. We live in Santa Fe, New Mexico. He lives in Florida. But together, we used our resources to find a buyer. He used his resources to find a buyer, and ultimately we did find a buyer and together as partners, we sold the asset. We paid our pro rata share of the expenses that went to the brokers and the title companies and what have you. And then all of the money that came into our bank account ultimately went to the nonprofit world. His money went to his personal uses, but we do partial interest gifts as frequently as they come up. We like them.
Kim Ledger:
I'm so glad you brought that up.
Bruce Geiss:
We do bargain sales.
Kim Ledger:
Yeah. Okay. Bargain sales, partial interest.
Bruce Geiss:
We do bargain sales, partial interest, we do assignments of bequests from nonprofits who get a gift bequeathed to them, and they don't want to take it.
Kim Ledger:
Yeah.
Katie Collin:
Good to know.
Bruce Geiss:
So they call us and say, please take this.
Kim Ledger:
Yeah.
Bruce Geiss:
And then we take outright gifts.
Katie Collin:
Right. Amazing that you can help people in this way, take an asset that could be troublesome in some sort of way and really turn it into something amazing.
Bruce Geiss:
Gifts of real estate often need help.
Kim Ledger:
Yeah.
Bruce Geiss:
They're often a little bit worn, the family has used them. We have another gift that we're working on that is designated for a Ren donor advice fund. The family has gathered at this home in Florida for decades. This is the parents' home, and they thought the best way to honor our family who has gathered here for every holiday for over decades is to donate it to Realty Gift Fund, who will create a daff at Ren for us, and all of our family will participate in the decisions as to where that money is granted in the future. I think that's a beautiful way to use an asset.
Kim Ledger:
Agreed. Agreed. Thanks so much Bruce for joining us today. For being a great partner with Ren and for joining us today for this episode.
Bruce Geiss:
Thank you for having me. Pleasure to see you both.
Katie Collin:
You Too. Talk soon.
Kim Ledger:
Buh-bye.
Thanks everyone for watching or if you turned in via podcast. Thanks for listening. If you want to learn more about Ren and how we might be able to help with your philanthropic program needs, visit www.renink.com or email us at consulting@renink.com. We'd also love to hear if you have questions or topics about planned giving you want us to talk about. And of course, don't miss the great information we have in our advisor's Philanthropic Insights newsletter. Sign up at renink.com/advisorinsights. Find all the links mentioned in the show, in the description, and you'll find expert tips daily on our social channels. Check it out. Until next time, I'm Kim Ledger. Give wisely.
