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1031 EXCHANGE VEHICLES

There are a lot of different investment vehicles and avenues to explore when determining where to investment your money. When executing a 1031 exchange, it’s important to check the boxes needed to satisfy and abide by what is needed for your exchange.  For purposes of executing on the IRS code section 1031 tax deferred exchange, “like kind” means investment real estate to investment real estate. So as long as you held your down-leg and also intend to hold the replacement property for investment purposes, then the replacement property likely qualifies.

Below are some common “up-leg” exchange scenarios. We are happy to discuss any of these or other idea’s you might have. We can also provide financial modeling demonstrating what the numbers would look like when exercising any potential 1031 exchange scenario.

Some Examples of Property Types (Fee Simple)

  • Apartments

    • Student Housing

    • Senior Housing

  • Industrial

  • Self Storage

  • Retail

    • Single Tenant Net Leased (NNN)

    • Multi-tenant strip

    • Anchored center

  • Single Family Home (for investment purposes)

  • Office

  • Manufactured Housing

  • Land

The vast majority of apartment sellers executing a 1031 will trade into more apartments or move into the zero management “Triple Net” Assets, while a select few move to more nuanced subtypes like Mobile Homes or even a house. Each property type has its pro’s and con’s and we are happy to discuss this with you in detail as you consider your exchange to see what is the best fit for you.

Alternatives to Fee Simple:

  • A large grouping of many investors into a single asset somewhere in the country. Each investor is a limited partner and returns can be strong. Can help satisfy an exchange when the downleg is overleveraged and the debt is difficult to replace. Downside, it is very large and you have little to no voice or contact with the operator(s), feels more like a REIT than an traditional investment.

  • Understanding that one caveat of the 1031 exchange is that you must hold title the same in your upleg, both DST’s and TIC’s satisfy this requirement. A TIC  is limited to 35 partners, so they tend to be smaller and more intimate and everyone has a vote and a say and a role. This can be great with the right partners, but partners can also be a liability if a property needs to be sold or refinanced or traded again.

  • Much like a DST, you are passively investing, this time along-side a, General Partner/professional operator/investor who sources the deal, puts each piece in place and runs/oversees the entire investment life cycle. This is typically called a local syndication, but it could be local investors but into a deal that is more opportunistically located. The General Partner will provide updates/returns on your invested capital on a quarterly or bi-annual basis. This will have a more intimate feel, and you will have access to the operator. The deals tend to fall between the private client and institutional price points and the deals can be catered towards certain investors if they are a larger piece of the equity portion of the deal allow for flexibility. It’s important to know the Sponsor/General Partners investment history and gain a comfort level prior to engaging.

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