14A — March 13 - 26, 2020 — 1031 Exchange — Financial Digest — M id A tlantic Real Estate Journal
www.marej.com
Financial Digest / 1031 Exchange By Jefferson F. Riddell, U.S. 1031 Exchange Services, Inc. 1031 + Delaware Statutory Trust
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office building, shopping cen- ter, apartment complex, in- dustrial property, senior housing, student housing or hotel-even golf courses have been offered. DSTs are much like professionally managed whole ownership rental prop- erties. Most whole ownership properties are too small for professional management but DST properties justify professional management because the value of the property typically exceeds $20 million. In addition to 1031 ex- change tax deferral, DSTs
have all of the benefits of rental real estate owner- ship including cash flow from rents, depreciation deductions and potential profit on resale. Along with the benefits, DSTs are subject to the standard risks of rental real estate ownership, but the risks are mitigated by professional ac- quisition analysis and evalu- ation (due diligence) at the sponsor, lender, broker-dealer and securities registered rep- resentative levels and ongoing professional management. DST properties are not speculative to-be-built prop-
erties or properties for which tenants need to be found. Instead, DST properties tend to be relatively new properties with tenants in place under typical length leases for the type of property involved. Of course some properties like hotels and golf courses are an exception because their “tenants” change daily. Since DSTs are deeded interests in real estate, they are not as liquid as stock market invest- ments so those who may have an immediate need for their funds should not buy DSTs. Each DST investor is a co-
owner of the property along with other investors. The typical first year cash-on-cash return for a DST property investment (depending upon the particular property) is between 4 1/2% and 7%. DST investments are pack- aged by real estate companies called sponsors. There are about 80 active sponsors in the United States. The busi- ness plan of most sponsors anticipates resale of a DST property within ten years, but some have sold earlier. The Purchase Agreement signed by all of the DST co- owners contains the rules gov- erning the relationship among the co-owners. Although DSTs may sound like partnerships, they are not-partnership in- terests and do not qualify for 1031 exchange. Also, DSTs (single properties) are not the same as REITs (multiple properties). Like partnership interests, REITs also do not qualify for 1031 exchange. Any person or entity that can own real estate can own a DST interest. Although they are designed as convenient replacement properties in 1031 exchanges, others may choose to purchase one or more DSTs in order to add passive investment real estate to their investment portfolios. Jefferson F. Riddell is a Florida Board Certified Real Estate attorney with over 40 years of experi- ence assisting people with a variety of residential and commercial real es- tate matters. U.S. 1031 Exchange Services, Inc. is a 1031 exchange quali- fied intermediary (QI). As president of U.S. 1031 Exchange services Jeff has been facilitating 1031 exchanges for more than thirty-five years. Formerly a licensed se- curities registered rep- resentative, real estate broker, Jeff is uniquely qualified to assist those who wish to avail them- selves of 1031 and 1031 exchange tax savings and also guides investors in diversifying their port- folios with nonpublicly traded REIT, LP and LLC real estate investments. Jeffs book, 21st Century Real Estate Investing Fea- turing 1031 has been pub- lished and is available at Amazon.com.
f you are an investment real estate owner who would prefer not to pay
tax on sale, you need to know about 1031 + DST. The process is simple-sell in a 1031 ex- change and p u r c h a s e D S T r e -
Jefferson Riddell
placement property. A DST (Delaware Statutory Trust) replacement property is a fractional interest in a large rental property such as an
SELL INVESTMENT PROPERTY TAX FREE
Learn about 1031 exchanges VISIT OUR WEBSITE > US1031.COM
Jefferson F. Riddell President Phone: (941) 366 -1300 Fax: (941) 366 - 6973 E-mail: jriddell@rlglawfirm.com
Board Certified Real Estate Attorney has been facilitating 1031 exchanges for over 30 years. Learn how a 1031 exchange may help you defer taxes, save money and maximize your investment dollars. Visit our website or call for a FREE consultation.
21 ST CENTURY REAL ESTATE INVESTING available on Amazon
U.S. 1031 EXCHANGE SERVICES, INC.
3400 South Tamiami Trail, Sarasota, Florida 34239
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