Generate Huge Contributions for Local Non-Profits Using Charitable Gifting of Real Estate
Did you know that most non-profits/charities will take a $500 donation over the donation of a $500,000 house? The challenge is the non-profit lacks the capacity to make mortgage payments, taxes, HOA fees, etc. Now there is a way that you can help your favorite non-profit unlock charitable gifts of real estate, claim a tax reduction while you’re still alive, and leave a lasting legacy in your community.
Cami Baker, the author of Real Estate Is Hot, Fundraising Is Not, has created what she calls her ROAC (Real Agents of Change) system that allows property owners to donate all or a portion of the value of their real estate to a non-profit without the non-profit assuming the burden of property ownership.
According to Baker, the beauty of this approach is that the non-profit is not competing for a part of the three percent of cash that most people have. Instead, they’re dipping into the “wealth bucket” of real estate which can be hundreds of thousands of dollars per donation.
The U.S. government first allowed tax deductions for charitable giving in 1917. While there are approximately 1.5 million non-profits in this country, Baker says that only two percent accept real estate donations. These donations currently total about $9 billion per year but could increase to $29 billion a year. The average donation (equity contributed) is $600,000.
While 80 percent of those who donate real estate to a non-profit do so because they are altruistic veterans, animal lovers, want to find a cure for cancer, etc. about 20 percent do so for the tax benefits. For example, donors can reduce their capital gains tax by deducting the full appraised value of the property from their adjusted gross income.
Charitable gifting of real estate
Baker’s ROAC system is a game changer for non-profits because they don’t have to take title. Instead, an intermediary acquires the property to handle the sale and then distributes the designated amount of the proceeds to charitable organization of the donor’s choice. While this system has been around for a very long time, it has been completely underutilized.
Baker explains that the intermediary functions much like a bank does with its REO properties. In fact, many non-profits have been burned so badly from previous real estate donations that their bylaws prohibit them from accepting donations of real estate.
The Five Keys for utilizing charitable giving of real estate
Here are the five steps you can take to help non-profits access charitable gifts of real estate: (1) Learn, (2) Lead generation, (3) List and liquidate the property, (4) Leverage, (5) Leave a legacy.
Charitable gifting of real estate has been around for over 100 years. While it is a simple process, the lead generation and the processes are different from typical transactions.
Baker says the most likely place for charities (and realtors) to find real estate donations is on the non-profit’s existing donor list. Many of their current donors will contribute real estate when they realize they can take advantage of the tax benefits, they have the option of taking out a partial cash distribution for themselves in conjunction with the non-profit donation, and/or they’re leaving a significant legacy for a cause about which they are passionate. In fact, many prefer to donate while they’re still alive to see the money put to good use.
2. Lead generation
Here are Baker’s top three recommendations on how to locate donors who would be interested in making a charitable gift of real estate.
The most important place to prospect for potential donors is the charity’s current donor list.
When you think about it, a donation of $600,000 on average is not something that you find through a Facebook ad. It’s based on a relationship with people who are already in love with your cause. This isn’t about selling them on it. You can’t convince somebody to donate real estate. What you can do is you inform, educate, and share with them what their options are.
The second place is financial advisors. Sixty-five percent of these donations are instigated by financial advisors. When you think about it, they know which clients are philanthropic, they know who needs a tax deduction, and they know the clients who are going into estate planning and simplifying their estate.
The third (group) are real estate agents because they know all the people who own property. They have already sat at the closing table with people who complained about capital gains tax. They have already been in the homes of veterans with the flag on the wall or the person who has 14 little cats and dogs running around when we do our listing appointment.
3. List and liquidate
Here’s how the process works:
Once someone wants to donate a piece of real estate to a non-profit, the intermediary, which is a specialized type of 503C nonprofit, takes title to the property. It’s a third party who guarantees a full commission and whose primary concern is that the realtor does their job and gets the property sold. It can sell properties not only in the U.S. but has also liquidated donated properties outside the U.S. as well.
For realtors who want to serve this market, Baker says the beauty of this model is that a realtor can focus on all the non-profits in their community. “That’s an average of 499 non-profits per county.” In Florida that number is 2,400 non-profits per county and in California, it’s number is 5,000.
Baker explained what constitutes a “legacy” depends upon the person and the organization. Every non-profit was created by passionate people who care strongly about their cause and want to help others. Donors contribute because they share that passion. What better way to create legacy by taking advantage of charitable real estate with the non-profit’s current donors.
The Berkeley Humane Society: Two Donations Totaling Over $1 million
Baker shared this wonderful story about how charitable real estate helped the Berkeley Humane Society.
It was December 10, 2021, and Baker’s team received a phone call from a donor who owned 12 lots and wanted to donate them by the end of the year to get the tax deduction. The team was able to transfer title in one week, then property sold for $406,000, and the proceeds were given as a grant to the Berkeley Humane Society.
The Berkeley Humane Society didn’t exactly understand how it all worked but decided to call their top donors to tell them about the $406K grant and ask if they knew anyone else who might be interested in donating real estate. A woman who had inherited a house that she didn’t want in a 55+ community in Carmel, California decided to donate it. The sale generated a $646,000 donation. Those two donations totaled $1,052,000.
Marketing and branding that make a real difference
To make a huge impact on the non-profits you care about, Visit the Real Agents of Change (RAOC) to learn more about how you can help serve the non-profits in your community and take advantage of charitable gifting of real estate.