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Net Lease Casual Dining Properties Outperform Market

According to a recent article in Realty Biz News, cap rates in the net lease casual dining restaurant sector were 5.75% in the first quarter of 2016. Casual dining restaurant properties with corporately guaranteed leases had cap rates of 5.65% while franchisee leased properties were priced 65 basis points higher at 6.30%. Cap rates for casual dining restaurant properties will vary depending on if the lease is guaranteed by a franchisee or corporate operator. In the first quarter of 2016, franchisee backed casual dining restaurants accounted for only 31% of the overall supply of casual dining restaurants. Franchisee operated restaurants were priced at a 65 basis point discount compared to […]

Understanding Delaware Statutory Trusts

A Delaware Statutory Trust (commonly referred to as a DST) is, as the name suggests, a legal entity created as a trust under Delaware state law. A DST is created for real estate investment purposes, and is especially useful in a 1031 exchange. Under a DST, investors each own a pro rata share of the DST itself. The DST in turn holds title to various real estate interests, and distributes any income received from the properties (either through rental income or the sale of the property) to the investors in proportion to their ownership share in the DST. The DST, via its signatory trustee, makes all decisions related to any […]

In A Nutshell: Tenancies In Common & 1031 Exchanges

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. Having an ownership interest in a TIC gives an investor the right to his or her proportionate share of net income, tax benefits and appreciation. The TIC owner is treated similarly to a fee simple owner and receives an individual property deed and title insurance for his or her share of the property. A TIC owner may bequeath his or her interest to […]

Is Fractional Ownership Right For You?

Many of my clients are individual investors, buying and selling investment real estate to grow their investment portfolios. One common question I hear from these clients is “how do I grow my investments faster?” They are concerned that the amount they have to invest on their own is simply not enough to achieve the long-term growth they desire. One option I often suggest is fractional or co-ownership in the form of a Delaware Statutory Trust (DST) or Tenancy In Common (TIC). This type of joint ownership allows an individual investor to acquire a larger and hopefully more profitable real estate asset than what an individual investor could have purchased with […]

Understanding A Delaware Statutory Trust

A Delaware Statutory Trust (commonly referred to as a DST) is a legal entity created as a trust under Delaware state law. A DST is created for real estate investment purposes, and is especially useful in a 1031 exchange. Under a DST, investors each own a pro rata share of the DST itself. The DST in turn holds title to various real estate interests, and distributes any income received from the properties (either through rental income or the sale of the property) to the investors in proportion to their ownership share in the DST. The DST, via its signatory trustee, makes all decisions related to any property held by the […]

The Financial Benefits Of A Delaware Statutory Trust

With the continued popularity of 1031 exchanges – and the ability to include ownership interest in a Delaware Statutory Trust (DST) within this section of IRS code – many investors flock to fractional ownership as way to help diversify their investment portfolios and acquire higher-quality properties. Yet, financial reasons are still often the primary driver. These include: Lower Minimum Investment A DST is allowed up to 499 individual investors, which allows the minimum investment amounts to be much lower than with a TIC (which only allows up to 35). This lets investors with less to invest to still participate in a shared-ownership strategy for real estate investments. Streamlined Financing For […]

Comparing DSTs to TICs In A 1031 Exchange

When it comes to investing in real estate, many savvy investors understand the benefits of fractional or co-ownership arrangements. Less day-to-day management responsibilities, bigger and better investment properties become available to them, and they can diversify their investment portfolios beyond traditional single-owner properties. But when an investor is ready to make the leap from single-ownership property to either a Tenancy In Common (TIC) or Delaware Statutory Trust (DST), the investor may be confused with the differences between the two. Here is a quick side-by-side comparison to clear things up. DST Structure TIC Structure IRS Reference Rev. Ruling 2004-86 Rev. Procedure 2002-22 # of Investors 499 max. 35 max. Ownership interest […]

1031 Exchanges: How Many Owners Can There Be?

For many investors, the allure of utilizing a 1031 exchange to reduce immediate tax liability and grow their portfolio is an irresistible proposition. Of course, after conducting a few successful exchanges on individually owned properties, a more experienced investor may be looking for ways to improve his or her portfolio. A possible answer may be with fractional or co-ownership investments such as Delaware Statutory Trusts or Tenancies in Common. Each allows groups of investors to pool their resources and purchase more expensive – and potentially more lucrative – pieces of investment real estate than they could do on their own. But one question on many investors’ minds is exactly how […]

Why Consider Fractional Or Co-Ownership For Your Next Real Estate Investment?

When it comes to investing in real estate, there are many ways to do it. Most non-professional investors are familiar and comfortable with the single owner method. The investor finds and purchases a parcel of real estate with the intention to capitalize on the property’s appreciation in value. It is a very simple and direct way to enter into the real estate investment arena. However, fractional or co-ownership investments are also a popular option that many non-professional investors never consider. They should. Fractional and co-ownership interests in real estate allow you to acquire, together with other investors, larger, more secure, more profitable and potentially more stable real estate than an […]

Obama Proposes Additional Limits On 1031 Exchanges

In his FY2017 budget, President Obama has once again set his sights on section 1031 of the IRS code. He has proposed a series of changes to the existing code designed to place new limitations and restrictions on 1031 exchanges. These proposed changes include: Limiting gains to $1,000,000 per taxpayer per year. Excluding artwork and other collectibles from eligibility altogether. Granting the IRS the rule-making authority to implement Obama’s proposal, including aggregating the gains on multiple properties exchanged by related parties. This means that a series of exchanges that each individually stay below the proposed $1,000,000 cap would still be disallowed if together they exceed the cap. If approved, Obama’s […]