1031 Tax Deferred Exchanges: Selling Investment Property? Learn how to avoid the tax! What is a 1031 Tax-deferred Exchange? When you sell appreciated investment Real Estate and “Exchange” into “Replacement Property” that allows you to defer capital gains on the sale of the first property. A properly done Exchange also defers recapture of previously taken depreciation.In an Exchange the funds from the sale of the “relinquished” property must flow directly to a Qualified Intermediary (similar to escrow).Exchangers have 45 days to identify property to buyThe purchase must be completed in 180 days It is important to note -- There are strict timelines that must be followed to qualify for a 1031 Exchange! Possible Benefits Of a 1031 Exchange Defer immediate Capital Gains Tax on property sale proceedsPrevent your past depreciation from being recaptured upon your saleExchange into "investment grade" , "net income property"Funds formerly lost to taxation remain with you, the taxpayer, earning potential returnsHeirs may receive favorable step up basisClosing Costs usually paid by the sponsor; not the investor 1031 Overview Replacement Property must be “like-kind”The Replacement Property must be of equal or greater valuethan the Relinquished PropertyProtection from depreciation recapture taxMultiple properties may be purchased from sale proceedsDifferent type properties are allowed (must retain investment status)Indefinite protection from tax through subsequent exchanges 1031 Services We Provide A nationally known real estate adviser to working for youNet Income and Multi Family PropertiesProperty diversificationFinancial counselingExpert supervision of the exchange processNon-Recourse debt (available on some offerings)Multiple properties within a single exchangeA sophisticated Adviser with an extensive background in Real Estate Since 1981, real estate investors have looked to us for knowledgeable advice and quality real estate investments Securitization, Percentage Ownership, and DSTs Securitization Section 1031 Allows Percentage Ownership in Larger Properties through Securitization. Securitization allows ownership in higher quality properties than might otherwise be possible.Typical properties are large Class A Apartment Communities, NNN Retail Centers, Grocery Plazas and other large, stable, properties.One potential benefit to investors is the ability to spread their funds among different properties within one exchange. Percentage Ownership Investors to allocate their investment amounts in each propertyGeographical and property type diversificationExchangers to own a portion of an institutional grade property DSTs Delaware Statutory Trust (DST) is a Real Estate Investment SecurityThis specialized trust meets Tax 1031 “Replacement Property" requirementsDST rules are inflexible as a condition of being 1031 eligible "Replacement Property"Allows investment in larger, "institutional" propertiesAllows investors to customize the size of investmentShould have passed rigorous due diligence DST 1031 properties are only available to accredited investors DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) 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. Other Key Things to Know as an Exchanger... Due Diligence It’s the process of analyzing all factors that affect value, or future value, of a property. Proper due diligence will analyze such factors as: Zoning compliance, Environmental hazards, Area incomes and demographicsA knowledgeable analysis of the PPM is essential in understanding the true value of investment property. What is a PPM? Securitized properties provide investors with a Private Placement Memorandum (PPM)PPMs provide investors with comprehensive information and disclosures much more extensive than typical real estate offerings.Material facts on the property are required to be disclosedProperty Sponsors must disclose known negative material factsThird-party due diligence is required on 1031 Replacement Property Offerings offered through Sourcenet Investment Services, LLC Selling Securities Securitization means the properties are offered to investors as a securityRegistered Representatives are under the jurisdiction of FINRA and The SECProperly adhering to SEC and FINRA requirements, any epresentative selling a security should be properly registered to do so We believe using a 1031 Exchange may easily be one of the best moves a property owner could make. Partnering with Sourcenet 1031 can make your good decision even better. Section 1031 Exchange real estate investments have risks. Investors should remember that there are always risks involved in real estate investing. The securitization process disclosure does not certify quality or investment worthiness or that risks have been removed. The 1031 Exchange process does not remove those risks. Real estate investment risks include: rent loss, area degradation, under-insured casualty loss, building obsolescence, area competition from new developments, loss of capital, loss liability and many other factors. Investors should also consult their tax professional advisors and consider all risks before investing. Real estate investors may lose their investment. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. This is not to be interpreted as tax or legal advice. Let's Continue the Conversation Name Email Phone Additional Info Thank you! Oops!