January 2023

Inside Cover D — January 2023 Forecast — M id A tlantic Real Estate Journal


2023 F orecast

By Dwight Kay, Kay Properties & Investments Six Potential Benefits of Exchanging into Delaware Statutory Trust Properties


here are a number of potential benefits associated with ex -

are at or near retirement, they are simply tired of the hassles that real estate ownership and management often bring. They are tired of the tenants, toilets and trash and are wanting to move away from actively man - aging properties. The DST 1031 property provides a passive ownership structure, allow - ing them to enjoy retirement, grandkids, travel and leisure, as well as to focus on other things that they are more pas - sionate about instead of prop - erty management headaches. Benefit Three: Increased cash flow potential** Many investors are re - ceiving a lower amount of cash flow on their current properties than they could be, due to their proper - ties having under-market rents, properties that have multiple vacancies and/or that are raw or vacant land sitting idle. DST 1031 ex - change properties provide an opportunity for inves - tors to potentially increase their cash flow** on their real estate holdings via a tax deferred 1031 exchange. Benefit Four: Portfolio diversifica- tion* by geography and property types Oftentimes, 1031 inves - tors are selling a property that comprises a substan - tial amount of their net worth. They want to re - duce their potential risk and instead of buying one property (such as another apartment building) or one NNN building (such as a Walgreens pharmacy or Taco Bell restaurant) they decide that investing into a diversified portfolio of DST 1031 properties with multiple locations, asset classes (property types) and tenants is a better fit for their goals and objectives. This is similar to how investors tend to invest retirement funds in mutual funds and Exchange Traded Funds (ETFs), as opposed to

placing their entire retire - ment savings into the stock of one particular company. However, it is important to note that there are no assurances that diversifica - tion* will produce profits or guarantee against loss. Benefit Five: Long-term non-recourse financing locked and in place to satisfy debt re- placement requirements of the 1031 exchange One of the requirements for a 1031 exchange is to take on “equal or greater debt” in the replacement property to what you had in the relinquished property (the property you are sell - ing). In today’s lending en - vironment, it is often hard for investors to obtain non- recourse financing at an acceptable interest rate and terms. Due to the DST 1031 properties’ sponsors typi - cally having strong lend - ing relationships, they are able to secure non-recourse financing at some of the best terms available in the marketplace. The DST 1031 investors are the direct recipient of these financ - ing terms that they would otherwise often not be able to obtain on their own. Benefit Six: Access to Institutional Grade Real Estate DST 1031 properties pro - vide access to large, insti - tutional-grade real estate that is often otherwise out - side of an individual inves - tor’s price point. With the typical minimum invest - ment of $100,000, investors are still able to purchase an ownership interest in large $20 million-plus apartment communities, $5 million- plus pharmacies or $15 million grocery stores, for example. This allows in - vestors access to a level of real estate that they just would not have been able to exchange into before. That being said, we also have had many clients with

very large 1031 exchanges opt to invest in DST 1031 properties because they did not want to place “all their eggs into one basket” by purchasing one single, large investment property. For more information about Kay Properties or to review a current list of 1031 Exchange eligible proper - ties please visit kpi1031. com/marej, call 1 (866) 839- 3079, or scan the QR code below to receive your FREE 1031 Exchange toolkit.

estate and DST properties contain risk. * Diversification Diversification does not guarantee returns and does not protect against loss. ** Past performance does not guarantee or indicate the likelihood of future re - sults. Diversification does not guarantee profits or pro - tect against losses. All real estate investments provide no guarantees for cash flow, distributions or appreciation as well as could result in a full loss of invested principal. Please read the entire Pri - vate Placement Memoran - dum (PPM) prior to making an investment. This case study may not be represen - tative of the outcome of past or future offerings. Please speak with your attorney and CPA before considering an investment. Securities offered through FNEX Capital, member FIN - RA, SIPC. Dwight Kay is founder and CEO Kay Properties & Investments. MAREJ

changing into a Dela- ware Statu - tory Trust (DST) 1031 property. However, it is impor - tant to note

Dwight Kay

that these potential ben - efits should also always be carefully weighed with the potential risks that are possible with DST invest - ments, and as with all real estate investments, inves - tors should consult their tax attorney and or Certi - fied Public Account before investing in DSTs. Still, DSTs continue to grow in popularity espe - cially among aging baby boomers who are tired of managing their own prop - erties and are looking for a way to transition into a passive income stream. DST investments not only provide investors the po - tential for passive income, but also the following six benefits as well: Benefit One: Tax deferral using the 1031 exchange Many real estate inves - tors have wanted to sell their apartments, rentals and commercial proper - ties for years but haven’t been able to find a prop - erty to exchange into and just can’t stomach the tax bill after adding up fed - eral capital gains tax, state capital gains tax, deprecia - tion recapture tax and the Medicare surtax. The DST 1031 property solution provides investors an ability to move from an active to a passive role of real estate ownership on a tax-deferred basis. Benefit Two: Eliminating the day- to-day headaches of property management Because many DST investors

About Kay Properties and Investments Kay Properties & In - vestments is a national Delaware Statutory Trust (DST) investment firm. The Kay Properties plat - form provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay cli - ents, independent advice on DST sponsor compa - nies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary mar - ket. Kay Properties team members collectively have over 400 years of real estate experience, are licensed in all 50 states, and have participated in over $30 Billion of DST 1031 investments. Disclaimer: This mate - rial is not to be considered tax or legal advice. Please speak with your own CPA and attorney for all tax and legal advice prior to consid - ering an investment. All real

2023 Forecast Spotlight

a section of the Mid Atlantic Real Estate Journal 117 HMS Halsted Dr. Hingham, MA 02043 P: 781-740-2900 www. mare J.com

Publishers Linda Christman lchristman@marejournal.com

Lea Christman lea@marejournal.com Editor

Karen Vachon editor@marejournal.com

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