Have DSTs Replaced TICs for Real Estate Syndication?

Real estate syndications are commonly used by taxpayers conducting 1031 exchanges of real property. In this article, we are going to talk about the current state of real estate syndications and whether DSTs have effectively replaced TICs.

DSTs vs. TICs

To some degree, the old TIC (Tenancy-in-Common) syndications have fallen out of favor. There are still TIC syndicated deals out there and there are instances in which TICs are an easier method for putting together a consortium of buyers.

It’s most popular with friends and family who want to get together and acquire a property as tenants-in-common. I also see it with developers who want to bring in friends and family to buy the “dirt” that will eventually become a development.

However, by and large, DSTs have replaced TICs as the modality for real estate syndication. There is an enormous amount of money going into syndicated real estate right now – particularly DST syndications. There is not enough inventory in the securitized world to satiate the demand. As a result, some firms will have trouble because there will be clients knocking on the door wanting to get in when the deal is already buttoned up.

Contact CPEC1031, LLC

If you have further questions about DSTs or TICs, don’t hesitate to reach out to the team at CPEC1031. Our 1031 exchange intermediaries have over twenty years of experience facilitating exchanges of all shapes and sizes. Contact us today to learn more about how we can help with your 1031 exchange!

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

Balancing 1245 Rapid Depreciation in a 1031 Exchange

The IRS is changing the way it looks at personal property that’s embedded in real property in 1031 exchanges. For a long time (roughly three decades), the IRS took the position that if the state of Minnesota considers the water heater that’s plumbed in as a permanent fixture and a component of the real estate, then they would go along with that and conform to the state standard.

Recently, some new treasury regulations were released defining what exactly constitutes real estate for purposes of 1031 exchange. Generally speaking, fixtures are still considered components of the real estate and can be 1031 exchanged for other real estate. That said, there can be some exceptions when it comes to things like specialty HVACs or water heaters that are for a special use over and above the standard infrastructure of the building.

1245 Rapid Depreciation

Some people engage in cost-seg studies where they parse out the various components for accelerated depreciation, creating what we call 1245 gain. You need to be cautious in those situations and make sure that your replacement property has a sufficient amount of 1245 components so you can match up your 1245 gains with 1245 replacement.

Assemble Your Team of Advisors

We always recommend surrounding yourself with the best and brightest advisors. Bring in your accountant, attorney, qualified intermediary, and banker in early on during the process to ensure you’re setting yourself up for success. Reach out to the like-kind exchange professionals at CPEC1031 today to learn more about our services and how we can help you execute a successful 1031 exchange.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Exchanges Involving 721 Contributions

Many investors have questions about like-kind exchanges involving private 721 contributions. In this article, we are going to talk a little bit about 1031 exchanges involving 721 contributions.

Buying Property with a Co-Purchaser

We see people who buy replacement properties with a co-purchaser. Let’s say that you sell a property for $5 million. Your brother-in-law has $5 million so you agree to purchase a $70 million property together as tenants-in-common rather than as partners. Remember - a single taxpayer doing a 1031 exchange can’t buy an interest in a multi-member entity or joint venture partnership – they need to buy replacement property, and a tenant-in-common interest in real estate would qualify.

Now imagine years down the line, you and your co-purchaser decide that it doesn’t make sense to be separate tenant-in-common owners of the property. Eventually you may want to each contribute your co-ownership interest to a joint-venture entity. You can certainly do a private 721 contribution. That’s the more traditional way it’s been used in the past.

Contact CPEC1031

If you have any questions about 721 contributions and 1031 exchanges, we’ve got you covered. Our qualified intermediaries are proficient in all aspects of the like-kind exchange. We’ve been helping taxpayers across the country with their exchanges for the past two decades. Let us put our experience to work for you on your next 1031 exchange. Contact us today at our Minneapolis office to learn more about our extensive 1031 exchange services.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

Conducting Reverse 1031 Exchanges in a Seller’s Market

Right now, it’s a hot seller’s market. As a result, we’re seeing a lot of reverse 1031 exchanges. At the moment, it’s really easy to be the seller of a piece of real estate. It’s much harder to be the buyer because it’s so competitive. Inventories are tight and there’s a lot of competition for the same property. If you find a replacement property that you really want, the smartest move may be to put your energy into buying the replacement property first in a reverse 1031 exchange.

How a Reverse Exchange with a Qualified Intermediary Works

In a reverse exchange, most often a qualified intermediary forms an LLC and purchases the replacement property on the taxpayer’s behalf. Rather than having the taxpayer grant a mortgage to the lender, the intermediary’s LLC is the buyer of the replacement property and grants the mortgage to the lender. The taxpayer may funnel the down payment in, but the intermediary is the one who acquires the property and holds it for up to 180 days so that the taxpayer has time to sell their relinquished property. When that happens, the intermediary takes the replacement property that they’ve already purchased and passes it to the taxpayer to complete their 1031 exchange.

This is beneficial to the taxpayer because they don’t have to sweat the 45 day identification period as much because the replacement property is already locked in.

Reverse 1031 Exchange Company

If you’re thinking about doing a reverse 1031 exchange, don’t hesitate to reach out to the qualified intermediaries at CPEC1031 today to learn more about how we can help. We’ve got more than twenty years of experience facilitating exchanges and can help you defer your capital gains taxes. Contact us today at our Minneapolis office to seat up an appointment!

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

Can You Combine Two Properties into One Larger Property in a 1031 Exchange?

There are many questions surrounding property in a 1031 exchange or real estate. In this article, we are going to discuss whether or not you can combine two properties into one larger property in a 1031 exchange.

Combining Properties in a 1031 Exchange

The short answer is, yes – you can combine two properties into one larger property in a legitimate 1031 exchange. The real question is whether or not the one replacement property is big enough to match the two relinquished properties.

Remember, in a 1031 exchange, your replacement property has to be equal to or greater than your relinquished property in value, equity, and debt. So if that replacement property is large enough, you can certainly exchange the two relinquished properties into it.

Qualified Intermediaries in Minnesota

At CPEC1031, our Minnesota qualified intermediaries have extensive experience facilitating 1031 exchanges across the United States. Our team can walk you through the entire 1031 process and help prepare all your documents in advance of closing. If you have any questions about the 1031 exchange process or how it may be beneficial to your situation, don’t’ hesitate to reach out to our like-kind exchange professionals today. You can find us at our primary offices located in downtown Minneapolis.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved