A 1031 Exchange is the process of selling an investment property and using the proceeds to purchase another like-like real property.

Property owners can pay as much as 42% in taxes on the sale of their property. 1031 Exchanges can help deffer or reduce those taxes.

1031 Exchanges can be great tools for building wealth if used properly. However, one of the many issues investors run into is not being able to find a property to move the money into. These can be because the investor does not like the local investments available or they are having difficulty using up all of the proceeds to fulfill the 1031 Exchange qualification.

If you are running into this issue, you have options available to you.

You can 1031 Exchange into a Delaware Statutory Trust (DST)

A Delaware Statutory Trust (DST) is an investment vehicle that allows investors to 1031 Exchange into. Exchanging into a DST has become a popular choice among real estate investors. This is because investors can have fractional shares of high quality institutional level real estate. DSTs can be a part of a well diversified portfolio even for active real estate investors.

Delaware Statutory Trusts identify properties that they believe are good investments to qualify the 1031 Exchange for its’ investors.

Sometimes DSTs are structured for larger asset management companies to purchase for their REITs. At this point, the investor will now have shares of a REIT without having caused a taxable event.

This is how investors can move their investment properties into a REIT.

Want to learn more about moving a 1031 Exchange into a REIT? Click the Button!

Please be aware that in order to exchange into a DST, you must be an Accredited Investor.

*Accredited Investors are defined by the SEC as an individual with a net worth (excluding primary residence) or $1,000,000+ or annual income in excess of $200,000 for last two years for an individual or $300,000 for a couple filing jointly.

Benefits of Exchanging a 1031 into a DST

There are plenty of benefits to Exchanging into a DST:

• DSTs will usually purchase institutional level properties. This can help diversify a portfolio into properties such as health care facilities, larger multi family complexes, industrial building, and much more.
• This can also be seen as a form of passive income. DSTs and REITs provide an income stream to their shareholders on either a quarterly or monthly basis.
• For investors who are concerned about the preservation of their wealth, this can be used as an estate planning tool. Your inheritors will receive a Step Up Basis on the funds inside of the DST or REIT.
• You can use this exchange in conjunction with other qualifying properties you may want to invest into.
• Once proceeds are inside of the REIT, you are able to take advantage of some of the tax benefits of the REIT structure.
• Many of these REITs are invested in many properties across the world. Once you are inside of the REIT you are able to be a part of a diversified real estate portfolio.

Risks:

If you are interested in moving your proceeds from a 1031 into a DST, please be aware of some of the risks:

• You are subject to investment risk. As with any investment, there is always the risk of your investment going down in value.

IntelliVest Wealth Management Can Help You With These Exchanges.

IntelliVest Wealth Management works with some of the largest investment management companies to help clients 1031 Exchange into a DST.

We offer free consultations to assess if this investment structure is appropriate for you and your goals. From there we can look at the appropriate investment companies to work with.

If you have questions if your property qualifies for these programs please contact us or call at (864) 598-0000.

Fee Simple Property

A Fee Simple Property covers a broader range of investment real estate. This typically will cover any property owned outright by the investor. An exchange into a fee simple property is usually best for investors who enjoy complete control over their investments. However, with more control comes more responsibility.

Unless if a property management company is hired, investors will have to endure all the work involved with running the property. This can include:

• Finding Tenants
• Removing Tenants
• Collecting Rent
• Any legal disputes you may have with Tenants

Unlike a DST, you can usually continue to 1031 Exchange from one Fee Simple Property to the next.

*IntelliVest Wealth Management is a Registered Investment Advisor Headquartered in South Carolina. This is not financial advice and is for educational purposes only. Please consult a financial professional to discuss your personal financial goals.