1031 Exchange Strategy for Accredited Investors

[Nick Cannon]

Hey Bigger Pockets!

I would assume that most investors on this platform know about traditional 1031 Exchanges. However, accredited investors that would like to sell and do a 1031 Exchange but don't want to physically manage the whole or part of a property any longer can take the proceeds and move it into a 'like-for-like' strategy called a DST (Delaware Statutory Trust).

There are 3 main scenarios where these strategies usually come into play:

1. The client wants to sell a property but is sitting on it because of the capital gains implications
2. The client sells a property or properties but hasn't allocated the entire amount to a physical property (ie - portfolio is sold for 2.5m and identified properties are valued at 2m. The 'leftover' 500k can be put in a 1031 DST product)
3. The client can use the DST as a backup. If they have identified physical 1031 properties but need a backup in case the deal doesn't go through.

Considerations:

1. -Only accredited investors or companies can take advantage of 1031 securities products.
2. -These strategies are not liquid (normal holding time is 5-10 years) although there are some products that are shorter duration Up- REIT (IRS code 721) and allow laddered liquidation which creates a tax-efficient exit strategy.
3. -Identification of the new property or properties needs to happen within 45 days of closing the sale of the subject property. You then have 180 days to close.
4. -Leverage has to be at or below the subject property.

There are specific and customized strategies that can be applied to qualified investors but I wanted to post here to see if there was any interest in partnering together.

Please message me if you'd like to have a further discussion.  

Thanks!

(Compliance Disclosure)

Neither APFS nor its Representatives provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.

Securities offered through American Portfolios Financial Services, Inc.(APFS) Member FINRA /SIPC. Investment Advisory Services offered through American Portfolios Advisors, Inc. (APA)an SEC Registered Investment Advisor.