As more landlords look for a way out of the day-to-day demands of property management, many are turning to tax-deferred investment structures that allow them to stay invested in real estate without continuing to operate it themselves.
For some, the shift is driven by retirement. Others are looking to reduce exposure to maintenance issues, tenant concerns and changing local regulations. The common thread among these investors is preserving the distributable cash flow from their appreciated and valuable properties.
That trend has brought more investors to San Francisco-based Hamilton Zanze, a private real estate investment firm that sponsors and currently manages 120 apartment communities across the country. The firm helps rental property owners reinvest through a 1031 exchange into institutional-quality multifamily investments.
“We do this every single day,” said Toby Costello, Hamilton Zanze’s Senior Director of Investor Relations. “The average person might do one, two, maybe three 1031 exchanges in their entire lifetime. For us, it is our specialty. We walk you through every step of the process and help you explore the strategies that fit your goals, so you can defer taxes, stay invested in real estate and leave the day-to-day management behind.”
Founded in 2001, Hamilton Zanze has completed more than $13 billion in real estate transactions and expanded its portfolio nationwide.
Costello cited the firm’s co-investment approach as a key differentiator. Hamilton Zanze principals, employees and their family members invest alongside investors in every property, accounting for nearly 10% of the overall equity. In the firm’s HZ Evergreen Fund, that participation is closer to 20%, reflecting a strong alignment of interests between the firm and its investors.
“We invest alongside you, which means our interests are aligned with yours,” Costello said.
That ownership stake influences how the firm approaches debt, insurance coverage and other risk-management decisions.
When evaluating markets, Hamilton Zanze looks for opportunities and risk factors to get the complete picture, focusing on markets where supply and demand are coming back into balance. In particular, the firm targets markets where apartment construction is beginning to slow after a period of elevated development and where renter demand remains strong. Using a proprietary tiering system, the firm’s acquisition team tracks local supply-and-demand trends to identify markets with strong fundamentals, such as sustainable long-term employment and population growth.
Rather than trying to predict broader market swings, Costello said the goal is to identify locations where fundamentals remain favorable.
For investors leaving active ownership behind, the appeal is often straightforward.
“They do not get phone calls from tenants anymore,” Costello said. “Investors tend to engage closely at the start — asking good questions, getting comfortable with the process. Over time, many step back. Not because they have lost interest, but because they have found something better to do with their time: travel, family, philanthropy.”
Properties in the firm’s portfolio are managed by Mission Rock Residential, a property management company affiliated with Hamilton Zanze.
Costello said investors are often motivated by estate-planning considerations as well. A single property can be difficult to divide among multiple heirs, while ownership interests in a larger real estate vehicle can be easily split.
In addition to traditional 1031 exchange services, Hamilton Zanze has expanded its offerings to include the 721 exchange.
Under a 721 exchange, qualified property owners can contribute their investment property directly into the HZ Evergreen Fund in exchange for OP units (an ownership interest in the Fund). Costello said the structure can eliminate the deadlines and transaction requirements associated with a traditional 1031 exchange while providing immediate exposure to a broader portfolio of assets.
He also noted that Fund ownership interests can simplify estate transfers while preserving certain tax benefits.
The minimum investment for qualified individuals participating through a 1031 exchange is $100,000, according to the company. Additional information can be found on the company’s website, HamiltonZanze.com.
“We are building long-term, multi-generational relationships with our investors,” Costello said. “If you are thinking through your options, we would welcome the chance to talk and learn what matters to you.”