1031 Exchange Blog
In this video, we’ll be talking about what financial planners and investors should be asking about the DST from the wholesaler or sponsor that’s selling them the DST interest.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2023 Copyright Jeffrey R. Peterson All Rights Reserved
When people are doing 1031 exchanges they're very nervous about finding, designating, and receiving the replacement property within the timeframes allowed. Remember, you've only got 45 days to identify in writing what you want to receive and 180 days to complete the purchase. Both of those deadlines run concurrently from the day after the closing of the relinquished property.
Sponsors or syndicators of real estate investments have derived a new way to fashion real estate called a Delaware Statutory Trust. What they typically do is acquire a number of high-grade commercial properties in a little portfolio and have those titled under the name of the trustee.
The advantage is that when people buy into those trusts the beneficial interests in the trust are deemed to be an allocated interest in the underlined real estate. So if I contribute 15% of the purchase price I would be deemed to be an owner of 15% of the underlying real estate.
The Delaware Statutory Trust model really derived as an evolution from the old tenant-in-common ownership. Tenant-in-common syndicators would sell fractional interests in specific property and give each of the owners a deeded fractional interest. But the tenant-in-common model did not work very well because oftentimes tenant in common decision making requires unanimous consent of all of the owners which can be very unworkable when there's a difficult situation for the owners to deal with.
Furthermore under the old tenant-in-common arrangements, they were capped at 35 co-investors. Under the Delaware Statutory Trust model it's much more flexible and the administration or ownership is taken care of by one figurehead owner (the trustee of the trust).
From a lender's perspective it's much easier for a lender to get their arms around a Delaware Statutory Trust model because they only have one mortgagor to deal with rather than a plethora of co-owners in a tenant-in-common arrangement. Oftentimes the institutional lender will loan money to the Delaware Statutory Trust and the beneficial owners are not personally liable for the debt which makes these Investments even more attractive if you have to offset debt on your old relinquished property with new debt on the replacement property. If you have to take out at it might as well be dead that you're not personally liable for.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2021 Copyright Jeffrey R. Peterson All Rights Reserved
There are many options to consider when engaging in a 1031 exchange of real estate. In this article, we are going to talk about Delaware Statutory Trusts and how they can be utilized to your benefit in a 1031 exchange.
A Delaware Statutory Trust is a way of owning real estate. In a DST, there is a trustee appointed who is the figurehead owner of the property. The people who have invested in the trust (the beneficial owners) are not deemed to be owners of a trust for tax purposes. Rather, they are seen as owners of the assets within the trust. That means Delaware Statutory Trusts may be eligible for 1031 exchange.
A Delaware Statutory Trust is a method for purchasing replacement property in a 1031 exchange. Here are some of the advantages of exchanging into a Delaware Statutory Trust:
Passive Ownership – Not Management Intensive
Portfolio Diversification
Non-Recourse Debt (Typically)
If you decide to exchange into a DST, it’s a good idea to use the 200% rule, rather than the 3 property rule. Otherwise, the amount of properties in the Delaware Statutory Trust may exceed the requirements of the 3 property rule.
It’s important to work with a qualified intermediary if you are considering a 1031 exchange of real estate. An intermediary is your go-to resource for all things related to your exchange. They can prepare all of your required documents, answer all of your questions, and help you find suitable replacement property. At CPEC1031, LLC, our intermediaries have more than two decades of experience helping clients with their like-kind exchanges. Contact us today at our Twin Cities office to learn more about 1031 exchanges and how we can help!
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2020 Copyright Jeffrey R. Peterson All Rights Reserved
When it comes to 1031 exchanges, you have several options when it comes to properties and it can be hard to decide what your best option is. In this article, we are going to explain a few reasons to consider debt-free DST properties for your 1031 exchange.
With all-cash, debt-free DST property, there is no risk of refinancing or lender foreclosure.
Buying your property free and clear is perhaps the safest way to own real estate. It also protects your principal and reduces the risk of future issues with the property.
With debt-free property you have the flexibility to weather any market fluctuations, recessions, or other related issues.
In a typical 1031 exchange, your replacement property has to be of equal or greater debt compared to your relinquished property. This can be an issue if interest rates are high at the time of the exchange. Debt-free DST property avoids this issue entirely.
A 1031 exchange is a fantastic vehicle to save money when selling real estate. At CPEC1031, we work directly with investors and taxpayers to facilitate their 1031 real estate exchanges. With over twenty years of experience, our intermediaries are well-versed in the 1031 exchange process and can walk you through every step from closing to closing. Don’t hesitate to reach out to us at our downtown Minneapolis office to chat with one of our qualified intermediaries about your situation.
Start Your 1031 Exchange: If you want to get your 1031 exchange started, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2018 Copyright Jeffrey R. Peterson All Rights Reserved
