1031 Exchange Services

/1031 Exchange Services

1031 Exchange Services

With more than 70% of ACRE transactions involving 1031 Exchanges, our advisors are distinctively positioned to offer clients customized 1031 exchange strategies. Our agent’s team with the nation’s leading 1031 Exchange Accommodator, along with our client’s financial advisor, CPA, attorney or other outside advisor, in putting forth an exchange strategy that meets their goals. As a market leader with extensive investor relationships, ACRE has been highly successful in securing assets for our exchange clients and selling assets to exchange buyers.

1031 Exchange Defined

Section 1031 is the provision of the Federal Income Tax Code that permits companies and individuals who sell their investment, rental, or business real estate to exchange that property for a property of “like-kind” without incurring any liability for paying capital gains tax. In essence, the taxpayer is deferring his or her tax liability. When the replacement asset is eventually sold for cash, the gain realized is subject to tax.
Sellers have a maximum of 180 calendar days from the closing of the initial sale to complete the 1031 and exchange. Within the first 45 days of this period a seller must designate candidate properties and properly identify them to the IRS. A seller may target up to three properties regardless of value or a group of properties with a combined value that does not exceed 200 percent of the value of the initial property sale. The proceeds from the sale of the original property must be held by a qualified intermediary and can be used as earnest money for designated property once all IRS requirements for a 1031 transaction are met.
1031 Exchanges are not exchanges in the context of two-party barter. Instead, they are typical sales and purchases that involve the same exact ingredients as any other sale or purchase, without the capital gains. The only real difference is the investor is increasing his selling and buying power by electing to avoid the drain of taxes under Section 1031 regulations. No other aspects of the transaction are affected.

Popular 1031 Exchange Options:

Apartments

Our available apartment inventory spans nationwide. Sellers can increase their cash flow, return on equity and the size of their portfolio through selling their smaller units and purchasing larger, better located apartment buildings.

Some reasons to exchange from Apartment to Apartments:

  • Increase Cash Flow & Return on Equity
  • Consolidate Multiple Small Buildings into One Larger Complex
  • Create Economies of Scale and Ease of Management
  • Greater Potential for Appreciation with an Improved Location

Triple-Net Lease (NNN)

The Triple Net Lease (NNN) is similar to a long-term corporate bond in the form of a real estate lease. It requires the tenant to pay all costs associated with the property use and occupancy, including real estate taxes, insurance, improvements, on-site property management and maintenance.  A Triple Net property is a real estate investment wherein the buyer owns the land and building while the tenant, a corporation, maintains a long term lease on the property.

Triple Net Lease Advantages

  • Relieve the owner from day-to-day maintenance and management issues typical of other investment related properties
  • Increase cash flow potential in the form of rent paid by an investment grade corporate tenant
  • Favorable mortgage rates result from entering a long-term lease with a credit rated corporate tenant
  • Eliminate expenses due to vacancy, management, leasing commissions etc.

Single Tenant Triple Net investment real estate properties are in high demand. Investors are keen on NNN leases due to their simple and usually profitable nature. Investors, fearful of the volatility found in today’s stock market, are trying to find more prudent investments for their hard earned money. Safe haven for many of these investors is found in real estate. Shopping centers, office buildings, power centers, strip centers, and apartment complexes all have management requirements. Single tenant triple net investments commonly have between 10-25 year leases in place and do not require management or maintenance on the part of the landlord.
For some experienced investors that have both the management know-how and available time to properly manage the investment, multi-tenant properties can be very profitable.  However, for most investors, single tenant investments are preferred.  With single tenant investments the owner does not have to heavily consider vacancy factors that are prevalent in multi-tenant office buildings, shopping centers, strip centers, power centers and apartment complexes.
When comparing single tenant triple net properties with multi-tenant properties, taking into account vacancy factors, management fees, tenant finish costs and leasing commissions the conservative single tenant triple net leased property is often preferred by most investors.
When comparing single tenant triple net properties with multi-tenant properties, taking into account vacancy factors, management fees, tenant finish costs and leasing commissions the conservative single tenant triple net leased property is often preferred by most investors.
A tenancy in common ownership interest allows investors to maintain an interest in real estate in keeping with 1031 exchange requirements but avoid all management responsibilities and still receive a regular income stream.

Tenancy in Common (TIC) or Delaware Statutory Trust (DST)

Investors desiring the tax deferral benefits of §1031 exchanges coupled with the advantages of fractional ownership increasingly are seeking the popular alternatives of tenant-in-common (“TIC”) or Delaware Statutory Trust (“DST”) co-ownership. Recently, DSTs have been gaining in popularity for a number of reasons including the ability to secure financing more easily and attract more investors with lower minimum investment threshold amounts.
A Tenancy in Common (TIC) or Delaware Statutory Trust (DST) program allows multiple owners to have an undivided interest in a real estate property that can qualify to 1031 exchange status, but is professionally managed by the sponsoring entity. The IRS looks at TIC or DST programs to evaluate whether a TIC or DST interest qualifies for 1031 exchange treatment, or whether it is in substance a partnership interest which is not considered like kind property, and not permitted in a 1031 exchange.
Some of the most attractive features of TIC or DST ownership you should consider include:

No Property Management. You are not responsible for any property management. Professional managers are already in place and controlled by the TIC program sponsor.

More Options You can purchase an interest in a large, Class A property that might otherwise be too large an investment individually.

Low Minimum Investment The minimum interest can be as low as $100,000, and there is no maximum.

Diversification Instead of owning just one property, you can diversify your holdings into different markets and property types. For example, you could buy part of an office building in Chicago, and apartment building in Phoenix, and research facility in San Diego. You can diversify geographically, by property type (commercial, residential, office, etc.), and by type of tenant (high tech, retail, manufacturing, residential, medical, etc.). Partial ownership of several different types of properties in different locations can bring greater stability and less risk for future income streams.

Greater Choices There are many sponsors of TIC and DST programs, so you always have a wide variety to choose from during the time you have to identify a replacement like kind property. It takes the pressure off.

High Quality Properties. There are many choices available. TIC or DST programs can include nationally anchored restaurants and drug stores, apartment communities, shopping centers, industrial and office complexes and others.

Flexibility After you sell your down-leg, you can identify one or more TIC or DST programs as replacement property, while you search for another apartment property to buy. You can then put some or all of your proceeds into a TIC or DST program that qualifies for 1031 treatment, or you can purchase another property outright with some of the proceeds, and invest the remainder in a TIC or DST. Again, it takes the pressure off.

Financing Already in Place Usually TIC or DST properties already have financing in place and the portion related to the interest you purchase can be assumed without qualification or loan assumption fees. No time lost to credit checks, loan applications or appraisals so that a TIC or DST purchase can close in a matter of days if necessary.

Simplicity Your only responsibility is to cash your monthly check.