With fractional real estate ownership, you can invest money into several properties. This is possible because you become one of the owners of the property, due to which you have to pay money. Even the risks associated with investments are largely reduced with this form of ownership. On the other hand, the possibilities of getting more profits are increased.
Whenever you purchase a property, you have to pay extra costs like renovation, property outfitting, and furnishing. But, with fractional ownership, all these costs can be saved. Even the time and hassles of outfitting the property are saved. This type of benefit is rarely offered by any form of real estate investment.
After purchasing the property, the owners have to take care of costs like repairs insurance, maintenance, and property tax. Some investors even hire property managers to take care of these operations. If you have a fractional ownership of the property, you will have to pay a minimal amount to maintain the property or for tax-related expenses.
And, the best part is that you don’t have to handle the tenants. Everything is taken care of by the trust. Due to all these advantages, fractional ownership related to real estate is gaining popularity. We, being one of the most trusted 1031 exchange companies, help you acquire fractional real estate ownership through DST investments.
With DST investments, you can enjoy all the benefits we have discussed above, along with the ability to defer taxes on capital gains through 1031 exchange.
We, at FAI Exchange, have always helped accredited investors to invest real estate through Delaware Statutory Trust. We also help the investors by informing them about different aspects of 1031 exchange.
Through this blog post, we discuss some essential tips you should know related to 1031 tax deferred exchange.
Don’t forget the expenses
You can pay some expenses with the exchange proceeds. These expenses include escrow fees, transfer tax, brokerage commissions, and exchange fees. This will not affect your deal in terms of tax-related benefits.
Ensure the proceeds are safe
The funds you receive after selling the relinquished property are held by an intermediary till you acquire replacement property. Check how this party is holding the funds. Check the account type the intermediary is using for keeping the funds. You must also ensure that the intermediary you have selected is reputable and financially stable.
The documents should be signed before closing
Exchange documents such as agreement between intermediary and real estate investor, notice to the buyer, etc. should be should be signed before closing on the replacement property.
Purchase enough replacement property
The replacement property you are acquiring should be of equal or greater value than the property you have sold. All the net equity you have received from the sale should be invested into the purchase.
If you are seeking right real estate investment for your exchange, contact us for Delaware Statutory Trust (DST) properties. There are various other benefits of DST properties that individuals are unaware of.
A lot of investors don’t know but they can defer some capital gain taxes and obtain cash for the remaining amount while selling property in a 1031 exchange.
An investor pays taxes on the debt obligations related to replacement property or the cash proceeds received. In both of these events, the investors receive a boot. A boot means a property that an investor receives during the exchange and is not considered like-kind. Receipt of cash is referred as cash boot.
The exchanger can receive the cash proceeds after purchasing the identified property. It can also be purchased after the exchange period finishes in case there are some properties that were identified but not bought. If the exchanger asks the closing officer for disbursing a fixed dollar amount related to proceeds, then also cash proceeds can be received by the exchanger.
It is advised to avoid doing an exchange if the boot is more than the amount of capital gain.
If you are a real estate investor looking for investment property in Massachusetts, you can connect with FAI Exchange for the same. This company offers exchange properties for 1031 in the form of Delaware Statutory Trust (DST). You can also get an advice on a partial exchange through the experts.
Learn more about the DST investments and 1031 exchange by visiting this link. You can call the representatives of the company directly to clarify your doubts: (888) 669-3332
The company also answers the queries via email: WLM@SNETINVEST.COM.
The most common form of exchange related to 1031 in real estate sector is delayed exchange. A lot of individuals believe that it is the only form of exchange for the investors. To defer capital gains tax, the investors can exchange the properties through several exchange types.
The major types of exchange process include:
In this type, an investor purchases a replacement property after selling the relinquished property. After selling his/her property, the investor gets a time frame of 45 days to identify replacement property.
It is a process in which two investors directly swap the properties. A QI (Qualified Intermediary) is not needed for this exchange. There is no monetary exchange in this exchange and the process is considered quite difficult.
The investor can upgrade the replacement property to raise its value before making an exchange. The other features are similar to delayed exchange.
An investor can acquire the new property before selling the existing property in this form of exchange. There are some strict guidelines linked to the reverse exchange that an investor should follow.
Personal property exchange
This 1031 exchange process involves an exchange of personal asset against another asset of like-kind. The intangible assets include business licenses, copyrights, website URL, whereas the tangible assets include artworks, livestock, and vehicles.
If you are searching replacement property for 1031 real estate exchange, contact FAI Exchange for this purpose. For all the details, visit this link.
Both personal and real properties can be considered the qualified properties for a 1031 tax-deferred exchange. A property, which s held for productive use in a business/trade or for investment purpose is eligible for exchange.
But, there are some property types that are not qualified for the exchange. These types include:
• Certificates of trust
• Notes, bonds, or stocks
• Interests in a partnership of a limited liability company with multiple members.
Replacement property, which an individual plans to acquire, should be a like-kind to the property that is being relinquished. Like-kind refers to the properties that are similar in character or nature, regardless of the difference in quality or grade. Every real property can be considered like-kind. The factors like improvement or interest do not decide whether a property is like-kind. This means you can exchange a land with a building for a raw land. An investor can also exchange a single property for multiple ones. A personal property is not like-kind to a real property.
If you have a limited budget, you can consider Delaware Statutory Trust (DST) as an option for 1031 tax-deferred exchange. The DST investments can be considered like-kind to a real property.
We, at FAI Exchange, can help locate suitable DST properties that can be used to defer capital gains taxes. You can also connect with us to find a Qualified Intermediary for the exchange.
When we talk about a 1031 tax exchange, four major properties participate in the exchange: the taxpayer, the intermediary, the buyer, and the seller. Apart from these, the advisors and real estate agents offer their support services during the exchange. Let’s check the roles of the major participants in an exchange.
He/she is the central character of an exchange process. Also known as the exchanger, the taxpayer is someone who possesses the property and wants to exchange it to defer the taxes. He needs to follow certain sets of rules to get success in his/her endeavor of saving the tax.
A buyer is an individual who’s interested in acquiring the property of the taxpayer. The property is known as relinquished property. And it is the capital gain on this property for which the taxpayer defers the taxes.
A seller is someone who’s the owner of the property that the taxpayer wishes to buy. The property that the seller owns is referred to as replacement property in 1031 exchange.
A qualified intermediary, or a QI, is a party that holds the money after the property has been sold by the taxpayer. A QA uses this money to buy replacement property from the seller. There are some other major roles of QA, like ensuring the process complies with regulations. it also coordinates the documents required for the exchange.
As discussed above, the advisers and real estate agents also play a key role in this process. And, we at FAI Exchange, help the taxpayers by helping them find replacement property in a 1031 exchange.
If you are a seasoned real estate, you might be aware of the term ‘fractional real estate investments.’ You can simply consider it as a co-ownership in one or multiple properties by various real estate investors. This type of investment is popular among 1031 exchange investors, who can defer capital gains taxes. For fractional 1031 investments, the IRS has approved two structures: the DST (Delaware Statutory Trust) and TIC (Tenants-In-Common).
Here are some perks of fractional real estate investments that make it a preferred choice.
Get a hold of high-value properties
An investor can get fractional ownership of properties like a medical office complex, multi-unit apartment building, or shopping complex. These types of properties are usually beyond the reach for an individual.
Handling a property as a landlord is one of the toughest exercises. There are even several books written on how to manage your property as a property. The good news is that you don’t have to manage or maintain your DST investments.
Enjoy stable income
You, as an investor, can examine potential returns and the risks linked to DST properties. This is because the DST properties are usually stabilized assets with active operating histories.
Diversification of real estate portfolio
The structure like DST allows an investor to have a hold of multiple properties. This helps in diversification on the basis of location and property type.
If you are looking Delaware Statutory Trust for 1031 exchange purpose, contact the experts from FAI Exchange. Apart from helping you locate the best DST investments, the experts will guide you through the whole exchange process.
Whether real estate investment is a good move or not is something that confuses some real estate investors. Through this blog post, we discuss benefits the real estate investors can enjoy through property investments in Massachusetts.
Real estate is a hard asset
Being a tangible asset, real asset is referred to as “real” or “hard” asset. The hard assets can be utilized to produce other services or goods. This offers an assurance that, even during economic downtimes, they will be of some value.
This is the reason why a lot of investors prefer investing in this type of asset. A real estate investment lets an individual enjoy ongoing monthly income. As the income is mostly passive, you are able to invest your time in core business activities or leisurely purposes.
When compared to other sources of income, you enjoy more tax benefits with real estate investment. The government offers benefits like low tax-rates for long-term profits and depreciation. You can also defer taxes on capital gains when you plan to sell your property. This can be done through 1031 exchange, in which you have to purchase like-kind property of same or greater value.
Diversification of portfolio
By diversifying your portfolio, you can reduce risks compared to portfolios with only bonds and stocks. You can receive consistent returns by making an investment in assets having low or negative correlation.
If you find investment in real estate somewhat cumbersome, you can choose an easier method. We are talking about DST investments. This is not only a hassle-free process but also allows real estate investments with less money.
A lot of individual investors prefer growing their portfolios by selling and buying investment real estate. One of common needs of these investors is to increase the investments quickly. More often than not, the amount they possess is not sufficient for achieving the growth they expect.
This is where fractional co-ownership appears in the picture. Through this process, an individual gets a chance to get the ownership of a profitable real estate asset, which is otherwise not possible for an individual to do with his/her own resources.
Fractional ownership also lets the investor diversify the portfolio. Delaware Statutory Trust (or DST) is one such form of fractional real estate ownership where the individual can get a hold of institutional-grade by investing only $100,000.
It is also popular among those investors who want to defer the taxes related to capital gains on investment property. This is done via 1031 real estate exchange, in which DST investments act as replacement property.
Tenants-in-common (TIC) is also quite popular among investors, but a lender underwrites multiple borrowers in the TIC structure. In the DST, only a single borrower is underwritten by the lender. A DST can have an unlimited number of investors, whereas the limit is 35 in the case of TIC.
These factors show that fractional ownership especially that of DST is quite beneficial for those who want good results through real estate investments.
You can contact the representatives from FAI Exchange to help you find DST properties that suit your budget.
While investing, every investor wants to be sure that his or her money into safe hands. This becomes more crucial when we are talking about complex real estate transactions. When you are investing in DST (Delaware Statutory Trusts) for 1031 exchange, due diligence is quite necessary.
Here we discuss how to do a proper inspection in this type of investment.
You must get the assistance of an experienced attorney for reviewing documentation for the transaction. An attorney will make sure they are no errors in the documents. You will also come to know about any clause that might affect you at later stages.
Analysis of sponsors
You must go through the financial condition, performance record, experience, and backgrounds of the sponsors involved in the property.
Check the physical condition of the property before making an investment. All make sure that the performance of the property is similar to that of other properties in the region.
These inspections make the Delaware Statutory Trust-related real estate investments successful. One needs to understand some market risks are always associated with DST.
If you are planning for a 1031 exchange, contact the representatives from FAI Exchange to know more about the process. Apart from helping you find the DST investments for this process, you can take the support of the company for finding a qualified intermediary. We will also guide you through the entire process.
Find out more about this company here. You can email your queries on email@example.com or give a call on (888) 669-3332. You need to register on the website to get access to latest DST offerings.