All Forum Posts by: Brandon Bruckman

That's correct. You can acquire that debt across the direct property and / or the DST/TIC.

The 1031 exchange rule to defer your tax is two part 1) reinvest all your proceeds and 2) purchase a property (or properties / DSTs/TICs) with an equal or greater market value.  

Thus the need for replacing the debt.  You could also add cash to your exchange account to reduce the debt replacement if you wanted. 

For sure! That's a great use case for DST/TIC, the reinvestment of remaining proceeds. Watch out for any debt you had on your SFR. You need to fully replace that debt in your replacement properties.

 Thanks for sharing.  I’m going to have to dig into this some more.  

Interesting!  I'm very curious how a CPA would respond to that.  Keep us updated! 

Hi Kyle - any funds you pull out of the REIT will be taxable. I'd perform the analysis upfront to decide how much to place in DST / UPREIT and how much to pay tax on to place elsewhere.

We have done this analysis and built a calculator to input your specific exchange details. I'd like to say there is a clear answer here, but there isn't. It depends on how much tax you owe, your assumptions about DST total returns and your assumptions on how much you can earn away for the DST market after you cash out.

What I can say, is its close. So qualitative factors like having liquidity from not exchanging might push you in that direction. 

We also pulled the full cycle returns for the largest DST sponsors since the inception of DSTs in 2004. DM me, I can share that with you.

The big risk is being married to the REIT company forever. If you ever want cash out you will owe tax. Adding to @Dave Foster ' s point, REIT returns simply may not hold up over time.  

It would be interesting to do an analysis on the 10-20 year return pattern of cashing out a portion of your funds, pay the tax and invest in potentially better performing assets vs the REIT returns. You could blend the two strategies, giving more diversification.

 It certainly seem that way to me.  We need the CPAs to jump in here!

This is a good one!  Always check with your CPA.  What's my tax bill if I sell and don't exchange? I had a client exit his real estate business and leave suspended losses behind.  

I guess if you don't have another use for the losses and a 1031 exchange is unattractive, use those losses.  

Good questions John.  

Do the math first. I'd talk with your CPA about your tax liability first. Verify what the on-line calculators are telling you. Next I'd understand the economics of each of your options, taking the cash, DST, NNN, etc.

The final decision will go beyond the numbers.  What goals do you have?  Are you creating wealth for the next generation?  You already mentioned you have the cash flow from other sources to live.