March 2023

14A — March 2023 — M id A tlantic Real Estate Journal

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M id A tlantic R eal E state J ournal

DST 1031 Exchange Toolkit . By Dwight Kay, Kay Properties Four ways to use DSTs for your 1031 Exchange continued from page 4A

Welcome to The Professor’s Comedy Corner. This is the third in a series of humorous stories and jokes written by Professor Ron Shaw exclusively for the Mid-Atlantic Real Estate Journal . The Professor’s Comedy Corner

is a good example of how to create a potentially diversi - fied* portfolio, along with this article on why creating diversification is important for real estate investors. 4. Back-up option. One of the many reasons in- vestors should consider DSTs is as a back-up option for their 1031 Exchange. Why is this an important factor to consider? Let’s say that you have suc - cessfully sold your investment property and are now proceed - ing to search for replacement properties that you can manage on your own. In today’s market, you may discover that identify - ing and closing on high-quality “like-kind” assets within the specified timeframe is not as easy as it sounds. This is when DSTs can be used as a backup option. The reason for this is because DSTs are pre-packaged specifically for 1031 Exchanges, so they can potentially be a very helpful tool to have in the bag in case your primary real property option falls through and you’re facing a failed ex - change. In addition, because of the turnkey nature of DSTs, you can often close on them within just 3 -5 days to give you a strategy to successfully complete your 1031 Exchange. Here is a great example of how Kay Properties helped rescue a client’s 1031 Exchange from failure using DSTs. Also, here is another example of how Kay Properties encouraged a client to include at least one DST in his list of potential 1031 ex - change eligible properties, and how this strategy provided a good back-up strategy. DST properties continue to be one of the most popular passive investment option for 1031 Exchanges. Knowing how to best use DSTs to avoid common 1031 Exchange chal - lenges, you will be better situ - ated to potentially complete your exchange and avoid the expensive taxes that could accompany a failed exchange. Kay Properties team mem - bers are always available for in-person meetings, zoom meetings and conference calls with investors to edu - cate and explain various DST options, strategies, and potential benefits and risks. Look here for access to a com - plete list of current 1031 eligible exchange DST properties, or use the convenient QR code below and receive your FREE

DSTs can provide a cover strat - egy for your 1031 Exchange: Let’s say you need to replace a $3,000,000 purchase price for a 1031 Exchange, but your real estate broker finds a property for $2,700,000. By investing the leftover $300,000 in a DST, you could successfully avoid the taxable boot. In this way, you could successfully com - plete your 1031 Exchange by acquiring both a real property investment and a DST invest - ment with an aggregate value of $3,000,000. 3. Diversification* and true passivity. You have probably heard the expression, “why put all your eggs in one basket?” If you decide to invest in one single tenant net leased property or one multifamily apartment building for your 1031 Ex - change, that’s exactly what you could be doing. However, DST properties can potentially allow you to achieve a level of diversification that you would not be able to achieve if you only bought a single NNN as - set or multifamily building on your own. By investing in a DST, you have access to a di - versified * portfolio of properties that are often high-quality real estate offerings with very large tenants that are profession- ally managed and potentially provide monthly cash distribu - tions. In addition, you can also achieve a truly passive man - agement structure, eliminating the headaches of the Three T’s: “tenants, toilets, and trash.” Investing in a single-tenant property, on the other hand, means you are relying heavily on the quality of a sole ten - ant. If that tenant fails to pay rent or even files bankruptcy, your income could likely be reduced or even completely eliminated. Similarly, would you invest all of your 401k into one company’s stock, even if that company is Ama - zon or Apple? Your answer is probably No. No matter how great a company is, you probably do not trust it with all of your family’s wealth. In the same way, there is no perfect investment property. You may be able to mitigate your potential exposure to the various risks of real estate by diversifying*. DSTs allow for diversification* amongst a number of different income producing properties. Here

At a recent networking event, a business colleague asked me how I was spending my time now that I was retired. I told him that I was working as an aqua thermal treatment engineer on ceramics, aluminum and steel under a constrained environment.

Dwight Kay is founder & CEO of Kay Properties. MAREJ About Kay Properties and www.kpi1031.com Kay Properties is a national Del - aware Statutory Trust (DST) in - vestment firm. The www.kpi1031. com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market. Kay Properties team members collectively have over 150 years of real estate experi - ence, are licensed in all 50 states, and have participated in over $30 Billion of DST 1031 investments. * Diversification does not guar - antee returns and does not protect against loss. ** Past performance does not guarantee or indicate the likelihood of future results. No representation is made that any DST investment will or is likely to achieve profits or losses similar to those achieved in the past or that losses will not be incurred on future offerings. This material does not con - stitute an offer to sell nor a so - licitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk sec - tion prior investing. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation. There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, gen - eral risks of owning/operating commercial and multifamily properties, financing risks, po - tential adverse tax consequences, general economic risks, develop - ment risks and long hold periods. There is a risk of loss of the entire investment principal. Past per - formance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed. Nothing contained on this web - site constitutes tax, legal, insur - ance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. Securities offered through FNEX Capital , member FINRA, SIPC.

The colleague didn’t understand what this meant, so I explained it this way: “I’m washing dishes with hot water under my wife’s supervision.” Professor Ron Shaw is a former corporate banker and university professor. He writes and performs comedy at corporate and university events such as conferences and seminars, training sessions, trade shows and industry programs, corporate retreats and outings, sales meetings and team building workshops. You can contact the Professor via email at: rms1023@ aol.com MAREJ

Why Opportunity Zones and Tiny . . .

Map of Opportunity Zones

trillion a year in lower wages and productivity.” Investing in tiny homes in OZs As this map of OZs from the US Department of Hous - ing and Urban Development shows, a large range of OZs ex - ist in every state of the nation. If there isn’t one in your com - munity, there’s probably one nearby. This means you have the chance to help your own region develop economically. Investing in tiny homes in OZs not only provides finan - cial incentives but also allows investors to make a difference in the world. Justin Draplin is founder & CEO of Eclipse Cottages. MAREJ

in one themselves to take advantage of their reduced maintenance costs. Positive social impact While investors benefit from putting capital into tiny homes in OZs, the community does as well. Tiny homes are a cost-effective housing solution that can help with the current housing crunch. Many communities around the country struggle to provide enough affordable housing to meet demand. According to the National Low Income Housing Coalition, “Research shows that the shortage of affordable housing costs the American economy about $2 continued from page 2A

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