All Forum Posts by: Account Closed

@Ian Ippolito I agree there are bad deals everywhere. On BP and crowdfunding sites.

In particular, DSTs are complicated investments. There are considerations with tax and estate planning as well as hold strategy. They are a sophisticated financial planning tool not at all comparable to buying a $100,000 rental home, even though potentially an investor could use just $100,000 to buy into one. The way distributions are taxed and how deductions for things like depreciation are treated in relation to one's original basis is very complicated and specific to each tax payer's individual tax situation. I think buying them on a site by pledging money is extremely risky, not to mention could blow up a 1031 exchange. They are better purchased from a financial advisor that is regulated by the securities industry who educates their client not only on the risks of a DST but also ensures it is a suitable investment in terms of distributions, investment goals and tax strategy. No client wants to find out the DST they bought on a crowd funding site generated phanton income they have to pay tax on or that they can't deduct depreciation or that upon sale even though the property sold for 40% more than it was purchased, they realize no upside because of a ginormous disposition fee they didn't fully understand because they didn't know what questions to ask. These investments are regulated by the securities industry because they should be. These sites are deep in the grey area of what is even allowed.

How many PPMs are read cover to cover by investors on a crowdfunding site? All 180+ pages of single spaced text. I bet less than 10%. And of those how many investors understand the legal language.  if you are reading 100 a month you must be reading a lot.  I’ll send you a PM to get you the PPM with the 30% fee and show you where it was buried deep in the PPM.    

@Ronald Starusnak I am in Bend and I see the supply and demand every day.  I also grew up here in a real estate family.  Bend is not a Phoenix or other metro area.  The housing market is dependent on buyers coming here with money and not needing jobs.  So when those buyers come and then decide, nah winter for 6 months is not for me, they leave.  I can name 3 people that moved here in the last 2 years putting the houses they bought new 2 years ago on the market right now to go try Colorado.

Again, not trying to discourage you but rather give you real - actual - information to do your due diligence with.  The realtors in town love to paint a different picture.  I think that 75% of the residents in Bend may have a real estate license too.  In the downturn of the bell they don’t sell anything so they have to get while the getting is good.  

My clients are real estate investors that decide to 1031 out of a local market and they are dropping their Bend properties as fast as they can before it turns.  I think it is accurate to describe Bend as a highly volatile market, so be careful is my point I am hoping to share.  

You also should research weather .... December is not the time to break ground on new construction or to be pouring foundations.  Inside work in the winter is really all you can do.  Mother nature may not let you build for $90/sf.  

@Ronald Starusnak I’m not here to discourage you but Oregon is a lot different than New York.  We are also up to peak prices currently.  No one is coming here building and becoming wealthy and there is already what I think is an oversaturation of homes under construction.  Research the bell curves in particular in Bend.  You might be surprised.  

@Ian Ippolito it was a disposition fee paid to the sponsor on sale.  Read the PPMs.  All the ‘fees’ the sponsors collect are collected from the investors within the deal.  Investors may not write a check but they do have costs associated with the deals and tgey are called sponsor fees (build in to deals and collected first)  .  And no it was not a mom and pop.  

A lot of them are just marketing companies.  A few things off the top of my head are to find out where they find their properties, how they are compensated and consider if you can 1031 exchange in to and out of them if that is of concern (which is should be).  I recently looked at a PPM on a crowdfunding site (not to be mentioned) with a 30% incentive fee on the sale.  They get 30% if the sell it for more than they 'project to'.  That is insane.  Read every single document before you sign it if you go this way.  

@Gary Gristick he could put the extra leftover funds that are not needed to close on the beach investment in something like a DST where they typically have $100,000 minimums with whatever amount is leftover. If he is accredited that is ....

Everyone is still figuring all this out.... tbd.  Ha.  Seriously though.  

There are plenty of DSTs that offer no debt.  That is not a reason not to look at them.  

 @Justin R. you would set one up to save yourself $800 in Franchise taxes, or whatever that amount ends up being based on your income. You might run projections on your potential FTB bill and then compare that to the legal costs of setting up your own DST. There are other DSTs that are established by large Real Estate companies that licensed securities brokers (such as myself) sell shares of to clients that usually complete a 1031 into. That is what is mentioned in this post as well - very different than what you are asking about - which is confusing a bit. I have never heard of anyone setting up their own DST, but maybe it's a new thing. I would look into what happens down the road when you want to sell a property and you want to do a 1031 exchange with this property that is held in your 'private DST' series as typically the same entity selling needs to buy a replacement to qualify as a 1031 Exchange. Maybe @Scott Smith can answer on that topic.  

If it is investment property, at such time that you wish to sell down the road, the LLC may be required to do the 1031 exchange, if you do one. Something to keep in mind. I see many clients with property in their revocable trusts.