The Role of Due Diligence in DST Investments

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.

Structural review

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.

Property inspection

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-relatedreal 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 wlm@snetinvest.com or give a call on (888) 669-3332. You need to register on the website to get access to latest DST offerings.

Common Misconceptions of 1031 Real Estate Exchange

A lot of individuals are only aware of the basic functioning of the 1031 real estate exchange. There are a lot of misconceptions related to the exchange. Due these misconceptions, several investors fail to get the full benefit of this procedure.

Through this blog post, we discuss these misconceptions.

The attorney can act as a Qualified Intermediary

Your attorney or CPA cannot handle the exchange on your behalf if he/she has provided accounting or legal services to you in the last two years.

“Like-kind” refers to similar type of property

This is another misconception due to which the investors don’t explore other options. In reality, if you are selling a commercial office building, you can purchase a raw land. The “like-kind” means that if you are selling real property, you can’t purchase artwork or aircraft.

The exchange has to happen simultaneously

It is not compulsory that selling and buying have to happen at the same time. This is why most of the exchanges fall under “delayed exchange” category. In this type of exchange, middleman (known as Qualified Intermediary) holds the proceeds on your behalf. The QA uses the proceeds for buying replacement property that you have finalized for the exchange purpose.

It is vital to get a help of an advisor who guides you through the whole process. FAI Exchange is one trusted firm that not only helps you in the process but also finds suitable replacement property for you. This firm has already helped various investors from Massachusetts in 1031 real estate exchange.

Read more about the services of the company here.

Resource: https://faiexchange.wordpress.com/2017/07/21/common-misconceptions-of-1031-real-estate-exchange/ 

Important Rules On 1031 Transactions

If you are a real estate investor, the chances are that you are aware of the role of Section 1031 for saving taxes. It lets you defer capital gains tax on real estate transactions. To enjoy the benefits of this Section, you have to comply with regulations as implemented by IRS.

Through this blog post, we discuss some rules of Section 1031 you must know as an investor.

No exceptions for the deadlines

If you are unable to complete the transaction as per the time frame, you are supposed to pay the tax on capital gain. For example, if you fail to close the purchase within 180 days, you can’t enjoy the benefits of Section 1031.

45 days to identify purchases

After selling your property, you get 45 days for identifying potential purchases. You are allowed to identify three properties in this period, provided you buy one of them.

Transaction must be qualified

This means the property you are selling must have been used for investment purposes.  You have to hold the property for passive income.

Properties should not be held by different owners

The 1031 exchange is applicable only if the same owner sells the replacement property and buys the relinquished property. If you purchase the property through an LLC and sell one using a personal name, the exchange will be invalid.

If you are a real estate investor from Massachusetts, you can defer capital gains tax by taking the support of FAI Exchange. This firm helps you in DST investments, which can act as replacement properties in exchange.

Read more about the services of FAI Exchange here.

How To Find A Qualified Intermediary For 1031 Exchange?

The Qualified Intermediary (QI) holds all the proceeds during 1031 exchange. The intermediary basically acts as a limited purpose depository institution during the exchange. There is no state or federal regulations on intermediaries in the US, except in states like California, Idaho, Nevada, Arizona, and Colorado.

The role of an intermediary is to create agreements needed to structure a 1031 exchange. It also makes sure exchange complies with the rules of Internal Revenue Service (IRS).

Intermediaries offer multiple services and possess various skills, training, and competence. The intermediaries are tax accountants, bank affiliates, attorneys, realtors, or title company affiliates. There are some intermediaries that don’t have any training as an exchange professional or a tax professional. Intermediaries charge some fees for their services or retain interest (complete or a portion) received on the funds. Some intermediaries charge through both of these ways.

While for an intermediary, make sure he or she has a right amount of experience, along with a verifiable reputation. Select an intermediary who is ready to advise you on exchange strategies and issues of exchange documents.

If you have trouble finding QI for exchange, you can take our help. We, at FAI Exchange, will help you find QI who is trusted and capable of giving the right advice.

The company has also helped the investors from Massachusetts in 1031 real estate exchange by offering DST investment options.

To know more 1031 exchange properties offered by the company, check this link. 

Is DST Investment A Good Option?

If you ask directly, we definitely give an affirmative answer, but the answer will not tell why it is so. Let’s see which features and benefits make DST a good investment option.

With DST, you can expand your investment portfolio. This happens because an investment of 100,000 dollars can also be made with it. With the remaining money, you can purchase more properties.

It is easier to transfer the beneficial interests because time required to buy a property is less. Even the paperwork is quite less, making it a hassle-free experience.

The DSTs are popular because there is no limitation imposed by IRS related to a maximum number of investors. As there is no requirement of setting up an LLC, it is not associated with LLC taxes and 

LLC management.

The lender underwrites only the Delaware Statutory Trust, which makes the loan nonrecourse to the investor. On the other hand, the individuals buying property on their own need to provide guarantees and arrange for financing.

Last, but not the least, an investor is able to defer the taxes related to capital gains after selling a property. This happens because DST acts as replacement property in 1031 exchange.

All these features and benefits show why DST investment is one of the wisest decisions by an investor. If you are looking for fractional real estate ownership in Massachusetts, you can always take the support of FAI Exchange.

To know more about the services of the company, check this link.

5 Things You Should Know About 1031 Exchange

There are various confusions related to the 1031 exchange. To offer some clarity in this regard, we have discussed five important things you must know about this exchange process.

Exchange is not for personal use

The provision is for business and investment property. This means the primary residence cannot be exchanged for another residential property. There is a provision for swapping vacation homes under this exchange, but you need to go through the regulations and requirements thoroughly.

Delayed Exchange is applicable

In an exchange, swapping of a property against another occurs between two parties. A lot of exchanges are delayed because it is difficult to find someone with the exact property that an investor wants. In a delayed exchange, the cash is held by a middleman after the individual sells his/her property.

The investor must close within 6 months

The investors are required to close on the replacement property within 180 days of selling the relinquished one. If s/he designates the replacement property on the 45^th day, the investor will get 135 days for closing.

An investor needs to designate replacement property

After selling the property, the investor needs to designate replacement property within 45 days. The designation of the property is done in writing to the qualified intermediary.

Multiple replacement properties can be designated

A lot of individuals often get confused on how many properties can be designated by an investor. As per the guidelines of the IRS, an individual can designate three properties as the replacement properties. There are also provisions to designate more properties, but certain guidelines need to be followed.

If you want any 1031 tax deferred exchange-related support in Massachusetts, you can take our support. Check this link for more details. 

Why Investors Select Delaware Statutory Trust (DST) For Investment Purposes?

Also known as unincorporated Business Trusts (UBOs), DSTs began in 2004.  They have become one of the major sources of investment for accredited investors due to numerous advantages.

Some of these advantages include:

Replacement property in 1031 exchange

The primary advantage of the DST is that it can be utilized as a replacement property for 1031 exchange.

Diversification of portfolio

The investors are able to choose multiple DST properties during 1031 exchange that results in diversification in terms of cities and asset classes, etc. 

Minimum investments are low

The minimum investments for DSTs are as low as 100,000 dollars of equity for 1031 exchange. On the other hand, the cash investments in DST can be as low as 25,000 dollars.

Maintaining an LLC is not required

The investors don’t have to pay annual state filing fees as they are not required to maintain an LLC. 

 

Unanimous Owner Approval is not needed

Unlike Tenancy-in-common (TIC), a DST does not require unanimous approval of the investors while dealing with unexpected situations.

Financing is easy

As the lender treats the trust as the only borrower, it becomes quite economical and easier to obtain financing. Also, the participation of individual investors does not impact the credit rating.

If you are looking for a suitable DST as an investment property in the USA, you can rely on FAI 1031. We are a team of experts with in-depth and experience on DST investment and 1031 exchange.

To know more about DST properties, visit this link.