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8C —April 28 - May 11, 2017 — Spring Preview — M id A tlantic
Real Estate Journal
D elaware S tatutory T rusts
By Dwight Kay, Kay Properties and Investments, LLC 4 Reasons why 1031 exchange investors choose DST Properties over traditional NNNProperties 1) 4) DST properties are prepackaged for 1031 inves- tors to be able to close on immediately.
NNN stands for triple net leased property whereby the tenant is typically responsible for property maintenance , taxes and insurance. Actual tenants will vary depending on the various DST programs and the companies listed may not be represented in all DST’s. 2) Diversification Many of our clients realize the idea of placing a large por- tion of their net worth into a single NNN property is just not prudent and that a diversified approach potentially makes more sense…. Here are a few potential rea-
sons why: Would it make sense to put 100% of your retirement ac- count into a single stock? No matter how great the company is that would be insane! People buy mutual funds and ETF’s because they don’t want their retirement to “live or die” off of the performance of a single stock. Why would you do the same by buying one NNN Property? Please note that diversifica- tion does not guarantee profits or against losses. 3) Inflation Protection Potential
The problemwith most NNN leased properties is the flat to minuscule rental increases that will potentially cause val- ues to suffer in a rising interest rate environment. DST properties allow 1031 investors access to asset classes that historically have tracked well with inflation such as mul- tifamily apartments and self- storage properties all without the burden of active hands on management. Many investors in today’s market are con- cerned about potential inflation and are seeking to position their portfolios accordingly.
Access to the same type of NNN leased real estate and ten- ants on a diversified basis. DST 1031 properties pro- vide access to NNN properties leased to tenants such as Wal- greens, CVS, BJ’s Wholesale Club, 7 Eleven, Starbucks, 24 Hour Fitness, Gander Moun- tain, Applebee’s, Tractor Sup- ply, Auto Zone, Advance Auto Parts, Dollar General, Sherwin Williams, Carl’s Jr., Wells Fargo, Sonic, etc., on a diver- sified basis with minimum investments typically as low as $100,000.
For an investor in a 1031 time crunch due to the 45-day identification period, a DST property with no closing risk is a solution to a very real capital gains tax burden. DST 1031 properties can typically be closed on within 3-5 business days. Investors in their 1031 ex- change wanting to buy a NNN property have a very real risk of not being able to close on the property due to numerous issues such as: • Financ ing no t coming through • Issues with 3rd party reports such as appraisals and environ- mental reports • Title and easement issues • Sellers not disclosing mate- rial issues in the properties lease such as early termination and co tenancy clauses which change the economics of the previously agreed to purchase price. Much can go wrong with trying to purchase a NNN property. The DST 1031 may provide a solution to investors not wanting to be burdened with the closing risks of NNN property. Dwight Kay is Founder of Kay Properties and Invest- ments, LLC. n Risks & Disclosures This material does not con- stitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memoran- dum (the “Memorandum”). Please be aware that this ma- terial cannot and does not re- place the Memorandum and is qualified in its entirety by the Memorandum. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This material contains infor- mation that has been obtained from sources believed to be reli- able. However, Kay Properties and Investments, LLC, Colora- do Financial Services Corpora- tion and their representatives do not guarantee the accuracy and validity of the informa- tion herein. Investors should perform their own investiga- tions before considering any investment. There are material risks associated with investing continued on page 16C
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