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Real Estate Journal — Spring Preview — April 29 - May 12, 2016 — 15C
M id A tlantic
1031 E xchange
By Ed Fernandez, 1031 Crowdfunding A tale of a TIC investor turned DST investor
D
aily 1031Crowdfund- ing.com hears of tragic stories from clients as
alone qualifies for the loan, so Jack would avoid the en- tire lending process, with its headaches and risks. Jack was pleased to find a selection of DST properties available to him and promptly identified one with upside po- tential and a debt-to-value ra- tio that met the requirements of his exchange. Facilitated by his qualified intermedi- ary, Jack purchased units of beneficial interest in the iden- tified DST immediately upon the sale closing of the TIC property. Within a matter of days his exchange transaction was complete. Without hav-
ing to qualify for debt or wait on other investors, Jack held direct interest in a healthcare facility in Tucson. At 1031Crowdfunding.com, we specialize in helping people find solutions quickly. Wheth- er coming from a TIC or an- other form of commercial real estate, a DST can be a great solution to your 1031 needs. Ed Fernandez is founder/ CEO of 1031 Crowdfunding, LLC based in Orange Coun- ty, CA. You can contact Mr. Fernandez by email at edfernandez@1031crowdfu- nding.com or toll free at (844) 533-1031. n
investment. Jack learned that DSTs acquire properties as the sole
ment, DST governance is bound by a list of rules known as the Seven Deadly Sins.
we help them find a solu- tion. An all too common story sounds s ome t h i ng l i k e t h i s : Ja c k c om- pleted a 1031 exchange in
“At 1031Crowdfunding.com, we specialize in helping people find solutions quickly. Whether coming from a TIC or another form of commercial real estate, a DST can be a great solution to your 1031 needs.”
Ed Fernandez
owner on behalf of the ben- eficiaries. The DST trustee is the sole decision maker, so management decisions aren’t at the mercy of unanimous investor approval. To protect investors from mismanage-
Furthermore, DST investors are protected without having to establish a special pur- pose entity because the DST maintains sole liability of the property. Another important advantage is that the DST
2006, purchasing a portion of a $20 million multi-family apartment complex in Chicago as one of 35 Tenant in Com- mon (TIC) owners. In 10 years, Jack had nothing but difficulty with the investment. First, he almost missed his exchange deadline because the loan ap- proval process was delayed after one investor failed to submit proper documentation in a timely manner. Then, because owning property put his personal liability at risk, he had to inconveniently set up a single member LLC that cost him both set-up and an- nual re-registration fees. In 2009 the property began to lose tenants. Certain deci- sions to boost property perfor- mance were delayed because unanimous owner approval wasn’t granted. The property expenses began to exceed the income and capital calls were made. With the property be- hind its target gains, selling hadn’t been an optimal option when the expected seven year holding period expired. Then the due date for repaying the loan balance approached. The choice came to sell or refi- nance, and Jack voted to cut ties with the property and the other owners. He especially wanted to avoid another round of lender approvals. To Jack’s satisfaction, the other owners voted to accept their losses and move on. With a 25% depreciation re- capture owed, Jack wanted to complete a 1031 exchange to defer the payment. It wasn’t long after he began looking for potential replacement proper- ties, however, that he became discouraged by the avail- ability of affordable proper- ties. But then we told Jack about Delaware Statutory Trusts (DSTs). While sharing many of the benefits of TICs, including fractional owner- ship, passive investing, and an ability to invest in higher valued properties, DSTs solve many of the drawbacks Jack had experienced with his TIC
1 0 3 1 ’ s m a d e e a s y
(844) 533-1031 www.1031Crowd f unding.com 1 Spectrum Pointe Dr, Suite 150 Lake Forest, California 92630
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