More comfortable path to real estate investment: 1031 Delaware statutory trust

who I used to think about helping trapped in the real estate investment because of high capital gains tax client in writing, and if they sell their property, they will owe.

In the Deferred Sales Trust me on column, I outlined how to use the Internal Revenue Code Section 453 deferred tax and roll the money into other investments not just real estate.

Another strategy, I’ve got a lot of questions recently about the use of the proceeds of the sale to Exchange 1031 Delaware Statutory Trust (DST). This is the way to stay in real estate – to avoid capital gains tax – but as a more passive owner.

Many real estate investors know at least a little bit about Exchange 1031. Since 1920, the concept has existed; it became the first 1,031,954 of the Internal Revenue Code 1, and after many years it has been updated.

Basically, it allows the owner or investors to sell property and defer capital gains tax on the sale.

There are some guidelines you must follow. You must set the sale before the end of 1031, your sales proceeds go to a third party, called a receiver or a qualified intermediary holds. From closing, you have 45 days to decide whether you want to enter the real estate exchange. Then you have six months to shut you determined property. If all you do, you have completed a successful 1031 listing. But until 2004, you are still a property with another alternative – so, whether you like it or not, you are still a landlord to work.

Recently, the revenue ruling 2004-86 determine Delaware statutory trust identified as real estate and, therefore, can be used as replacement property 1031 foreign exchange trading program. If you’re tired of managing their own properties, you can, on the contrary, interest in obtaining a fraction or percentage of DST, and become part owner of a larger real estate investment – a 300 unit apartment building, and grocery centers, medical office buildings, etc.

Therefore, it is not Mr. and Mrs. Smith as a tenant, ask you to repair garbage disposal, Walgreens and CVS are tenant lease with the company. It has to income-producing real estate, etc., which is particularly suitable for retirees more hands-off approach. More than a dozen sizable companies trading on the exchange with investors ŧØ to be professionally managed and a fewAlmost turnkey.

One drawback (of course), and flowability. You still own property – unlike stocks, where you can hit a button and sales. Holding period may be 5-10 years.

You should also make sure that you are dealing with a reputable company, known as sponsors, when you build the deal. I prefer that has been operating for more than 10 years of people – the management of a large real estate portfolio and – which proves their continued downturn in the market, and to prove the acquisition, management and disposal of assets on behalf of investors good records throughout the United States the good news is that there are a small number of them have done so for many years. If you have a T-rusty financial adviser, he can help you determine who to work with.

Investment policy can run hot and cold – and DSTS cool down for a while, due to the recent economic recession and real estate bust. However, they provide a viable solution to the problems of ordinary investors. Talk about your tax attorney and your financial advisor to see if this strategy makes sense for you.