If you are new to the idea of securitized real estate and fractional ownership of investment property, you may be confused at the different types of properties available. Perhaps you have always been a single owner investor of one or two single-family or duplex rental properties, and are unsure whether to make the jump to a more sophisticated investment. Or perhaps you aren’t a real estate investor at all. Perhaps you find yourself wishing to sell a parcel of property you’ve held for a long time, but are faced with significant capital gains. You may be looking for a way to defer a large tax bill, while also finding a […]
In some areas of the country, a real estate boom is happening that is having a direct impact on 1031 exchanges. High demand for properties is making it difficult for investors to find suitable replacement properties within the strict IRS timing rules. So what is an investor to do when they want to defer capital gains through a 1031 exchange? For many investors, the answer lies in fractional ownership arrangements utilizing Tenancies in Common (TIC) or Delaware Statutory Trusts (DST). With these sort of investment vehicles, an investor is able to purchase a portion of an overall investment property and share in a proportional amount of revenue and appreciation. TICs […]
For investors new to the real estate market, the idea of investing in a triple-net lease property may seem like an appealing – yet also daunting – proposition. While such investments can be quite beneficial to investors, they can also bring with them complications. Understanding the basics and conducting appropriate due diligence are both required. Likewise, careful negotiation and consideration of your investment objectives should be considered before committing to this sort of investment property. The Basics Triple-net leases are used in a variety of contexts, including rental of office complexes, industrial buildings and retail space. The terms of a triple-net lease requires the tenant to assume responsibility for taxes, […]
For the real estate investor who wants to defer capital gains taxes, a 1031 exchange is an appealing solution. But perhaps the same investor wants to move into larger, more lucrative parcels of real estate – the sort of investments he or she may not be able to make on their own. Investing in a Tenancy in Common-structured investment may be one solution. Tenancy In Common (TIC) is a way for two or more individuals to have an undivided fractional ownership interest in a single property. With a TIC, each owner has individual rights and obligations related to the property. These rights equal the proportionate share of the owner’s interest. […]
According to a recent article in Realty Biz News, 1031 and private investors are dominating the acquisition of net lease assets priced below $10 million. And for investors with low equity requirements (below $2 million), QSR properties are a more appealing alternative to dollar stores for 1031 exchange buyers. Why? Leases that offer recognizable tenants with long lease terms, no landlord responsibilities and rental escalations. Read the full story here.
So you are an investor with a particularly unique set of circumstances. To minimize risk, you’d like IRS guidance on the nuances of a planned investment transaction, before you proceed. The good news is that there is an avenue for asking your question and receiving a cohesive response. As an investor, you should be familiar with Private Letter Rulings (PLR) issued by the Internal Revenue Service. While many investors will never seek a PLR themselves, they will often rely on other rulings for guidance when conducting their own exchange. A Private Letter Ruling is a written statement issued by the IRS in response to a taxpayer’s formal request for guidance. […]
1031 exchanges have enjoyed explosive growth in popularity in recent years. Once the sole domain of professional investors and commercial brokers, today you will find 1031 exchanges being used by professional and casual investors alike. However, along with this popularity has come many misconceptions about this powerful tax-deferral tool. Allow us to debunk some of the most common myths about 1031 exchanges. A taxpayer cannot complete a 1031 exchange with a related party. FALSE! Related parties can buy or sell property in a valid 1031 exchange. When related parties (e.g., parents, spouses, children, siblings, etc.) exchange property, the related party is obligated to own the property for at least two […]
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One area that is carefully reviewed in any 1031 exchange is the identification of replacement property. Did identification occur within approved deadlines? Was the property specifically identified? Does it meet value requirements? All these questions trap the unwary investor. However, you can avoid unnecessary IRS scrutiny by following these tips. 3 Property Rule – This allows an investor to identify up to three replacement properties eventually acquire, one, two or all three of them. 200% Rule – An investor can identify more than three possible replacement properties so long as the total fair market value of all those properties identified does not exceed 200% of the fair market value of […]
If you are at all interested in investing in real estate, you may have heard the acronym “DST” along the way. DST stands for Delaware Statutory Trust and it is a great way to boost the profile of the property you own, while still taking advantage of the tax benefits of section 1031 of the IRS code. A DST is actually a legal entity created for real estate investment purposes as a trust under Delaware state law. DSTs are especially useful in a 1031 exchange. The IRS has determined that any beneficial interest in the DST is treated as identical to a direct interest in real estate. This means that […]