- WHAT IS A 1031 EXCHANGE?
- WHAT IS A DELAWARE STATUTORY TRUST?
- WHAT ARE THE BENEFITS?
- STEPS TOWARD COMPLETING AN EXCHANGE
- I’M INTERESTED, LET’S GET STARTED
WHAT IS A 1031 EXCHANGE?
A 1031 Like-Kind Exchange allows an investor or business owner to sell an investment property and replace it with another property (passive or active ownership) of equal or greater value within a time frame of 180 days from the date of close using a qualified intermediary. If all the criteria are met the investor can defer taxes on up to 100% of capital gains created from the sale of the original property. Some form of 1031 Like-Kind exchanges has been around since 1921.
WHAT IS A DELAWARE STATUTORY TRUST?
A Delaware Statutory Trust (DST) is a legal entity formed under Delaware trust law that may be structured to qualify as eligible “like-kind” replacement property for the purposes of 1031 Exchanges.
DSTs permit eligible investors to become proportional owners of professionally managed, institutional-quality real estate projects alongside other accredited investors. As such, DSTs permit Exchangers the potential of achieving the tax benefits of 1031s when exchanged into a passively owned, turnkey investment property.
WHAT ARE THE BENEFITS?
- DSTs can help relinquish the burden of managing properties without giving up the benefits of real estate investing. DSTs have professional management, so investors don’t have to deal with tenants and associated upkeep.
- As a 1031 exchange, landlords can sell their investment properties, defer all income tax on the sale of the properties and avoid leaving a tax burden to their heirs. If structured properly, in addition to tax deferral treatment, this investment product can provide long-term income and asset preservation.
- With DSTs, you can collect monthly income on-time with no worries about maintenance, repairs, or vacancies with a portion of this income being received potentially tax-free. DSTs also allow you the ability to participate in increasing income based on any applicable rent increases.
- You will be able to capture your share of any appreciation of the DST investment properties over time.
- DSTs offer you the opportunity to diversify your portfolio by giving you the ability to choose investments with various geographic locations, property types and debt leverage.
STEPS TOWARD COMPLETING AN EXCHANGE
The path toward successful 1031 exchanges includes incorporating and understanding several key steps:
- Consult early on with 1031-familiar real estate professionals to help with your sale and finding replacement property/properties.
- Engage an experienced Qualified Intermediary (we can make a referral) to handle the transaction.
- Confirm the Qualified Intermediary can securely protect your exchange proceeds during the period between your exchange sale and replacement property purchase.
- Align with professionals specializing in the DST marketplace who have ready access to a selection of pre-screened DSTs vetted by a thorough due-diligence process.
- Expect strong coordination and frequent updates from your 1031 exchange team.
- Start searching for Replacement Property as early as your schedule allows to avoid rushes and deadline crunches
TIMELINE FOR 1031 EXCHANGE
I’M INTERESTED, LET’S GET STARTED
Capital Gain Strategies For Highly Appreciated Investment Real Estate
Asset Strategy is an independent wealth management firm with over three decades of experience. Our ethos is centered on providing our clients with thought leadership, education, and advice across the spectrum of investment and financial opportunities. That’s why we’re excited to help our clients meet their investment and planning objectives when considering the sale of investment properties through a 1031 exchange. We’ll guide you through the process and help you select and acquire suitable 1031 exchange eligible investments to meet your real estate portfolio goals and objectives. Download our complimentary guide today to learn more!
Sean Whalen, CFP®, MSF is the Director of Private Wealth and Senior Consultant at Asset Strategy. He has 20+ years of experience in investment management, risk management, budgeting, financial planning, and capital gain strategies. He formerly worked at Morgan Stanley and Santander Investment Services. He holds a Master of Science in Finance degree from Brandeis University. Contact us to learn more about our team.
William “Bill” O’Neill, AIF®️ is a graduate of Merrimack College with a BS in Finance. He is an Accredited Investment Fiduciary from the Center for Fiduciary Studies. Bill’s role with Asset Strategy is Communications Manager, which draws from his 25 years of experience as a serial entrepreneur. He was previously a partner/founder in an executive search firm, owned a purpose-built construction company, and helped develop a corporate marketing and communications firm. Bill has also been an investment property investor for over 20 years.
About Asset Strategy
We are an independent consulting & investment advisory firm that was created to service the unique needs of our clients. For over 30 years, the Asset Strategy network of companies has been providing impartial investment and risk management services to help ensure financial wellness to a wide array of investors. Asset Strategy assists clients with managing the risk and responsibility of investment programs and helping individuals achieve successful financial outcomes. As fiduciaries our relationships are built on the bedrock of trust and confidence that are backed up with a legal responsibility to always put our client’s interests above all else.
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DST 1031 properties are only available to accredited investors (typically defined as having a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years; or have an active Series 7, Series 82, or Series 65. Individuals holding a Series 66 do not fall under this definition) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney.
IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax concepts, therefore you should consult your legal or tax professional regarding the specifics of your particular situation.
There are material risks associated with investing in real estate securities including illiquidity, general market conditions, interest rate risks, financing risks, potential adverse tax consequences, general economic risks, development risks, and potential loss of the entire investment principal.
Because investor situations and objectives vary this information is not intended to indicate suitability for any individual investor.
Advisory services offered through Asset Strategy Advisors, LLC (ASA). Securities offered through representatives licensed with either Concorde Investment Services, LLC (CIS), member FINRA/SIPC, or RCX Capital Group, LLC (RCX), member FINRA. Insurance offered through Asset Strategy Financial Group, Inc. (ASFG). ASFG and ASA are independent of CIS and RCX. To access Concorde’s Form Customer Relationship Summary (CRS), please click here. To access RCX’s Form CRS, please click here.
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