Live Support Chat

Category Archives: 1031 Exchange Replacement Property

Financing Essentials of a Delaware Statutory Trust

Unlike other methods of real estate investing, a Delaware Statutory Trust (DST) offers several unique benefits with regards to financing and liability with regards to investors. First, use of a DST greatly simplifies the process for financing securitized real estate, and usually entitles investors to very competitive interest rates often reserved only for large financial institutions. How is this possible? Because with a DST, the trust itself is the sole borrower and owns 100% of the fee interest in the property. This eliminates the need to vet every individual borrower, making a DST far more appealing to lenders than, say, a Tenancy in Common where up to 35 individual owners […]

What is a Reverse Exchange and How Does One Work?

Real estate investors know about the powerful tax-deferral opportunities of a 1031 exchange. By selling existing investment or business property and then replacing it with “like kind” property, capital gains tax can be deferred (in some cases indefinitely). But what happens when an investor finds the ideal replacement property before they sell their existing investment property? Do they have to pass up the opportunity to acquire the perfect new investment simply because they haven’t sold their unwanted property? No. An investor simply needs to understand and implement a “reverse exchange.” A reverse exchange allows an investor to acquire replacement property before selling relinquished property. Of course, the IRS imposes strict […]

Using A 1031 Exchange To Replace A Vacation Home

For many individuals, the sale and replacement of a second home will incur capital gains taxes. The good news is that, if appropriate rules are followed, these homeowners can benefit from the tax-deferral benefit of a 1031 exchange. The rules governing such transactions are explained in Revenue Procedure 2008-16. Here the IRS offers clarification to a previously confusing section of 1031 code. As of March 10, 2008, vacation home exchanges will qualify if all of the following are met: Relinquished Property The owner must have held the vacation home for at least 24 months prior to the exchange. For each 12-month period preceding the exchange, the vacation home must have […]

Three “Must Know” Things About A 1031 Exchange

A 1031 exchange can be a powerful tax deferral tool for real estate investors. However, to ensure the validity of any exchange in the eyes of the IRS, three straightforward rules must be followed. The margin for error is not kind, either. The smallest misstep can result in the IRS invalidating the entire transaction and demanding immediate payment of capital gains tax. Like-Kind Exchange In every circumstance, the property the investor is selling and buying must be “like-kind.” Note that this does not mean identical. Rather, “like-kind” is a federal tax phrase that relates to the nature of the real estate while it is held by the investor. The key […]

Due Diligence Is Not Optional When It Comes to TICs and DSTs

Every investor wants to be certain that they are putting their money into solid investments, especially when it comes to complex real estate transactions. Due diligence – the analysis of the circumstances surrounding an investment – and full disclosure of all material facts is an essential component of the investment process. Especially when it comes to Tenancies in Common (TIC) and Delaware Statutory Trusts (DST). Every responsible investor should make sure they complete this very important process before entering into a transaction. Sponsor Analysis – Be sure to scrutinize the experience, financial condition, performance record and backgrounds of the key players involved in the sponsorship. Structural Review – Enlist the […]

What types of assets are available in TICs and DSTs?

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 […]

Can’t find a suitable replacement property for your 1031 exchange? Consider a TIC or DST

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 […]

The Nuts and Bolts of Triple Net Lease Properties

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, […]

Benefits & Risks Of Tenancies In Common

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. […]

Who Is Dominating The Net Lease Quick Service Restaurant (QSR) Market

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.