DST 1031 Exchange Case Studies

Challenge: The client was looking for specialized and focused help in evaluating DST 1031 properties for her 1031 exchange. She had been introduced to a financial advisor that not only did not fully understand how 1031 exchanges and investment real estate work, but also only had two DST properties available.

The client was then introduced by a family friend to Kay Properties and Investments, LLC. She was relieved to find a group that truly specialized in DST 1031 properties, had answers to her specific real estate related questions, had access to a full menu of over 20 DST 1031 properties and lastly was able to construct a portfolio that met her needs and objectives as opposed to what met her financial advisor’s.

Result: In the end, the client was grateful to Kay Properties for helping her to avoid the higher risk asset classes in the marketplace such as hotels, oil and gas and saltwater drilling. The client was able to successfully complete her 1031 exchange into a diversified* portfolio of DSTs that did not expose her to additional risk factors entailed in the exotic asset classes just mentioned.

The client was a real estate investor that had paid off his rental properties completely over the years. When researching DST properties, financial advisors pitched a handful of properties with large balloon mortgages that would ultimately come due in 5-10 years. What the “financial advisors” failed to mention was that when those properties were sold he would then not be able to purchase any property at any loan-to-value, but that he would then have to take on “equal or greater debt” per the 1031 exchange IRS guidelines.

Result: The client was thrilled to have been introduced to Kay Properties and Investments, LLC by his CPA, as he was able to learn the ramifications of going from an unleveraged position in his rental properties to a leveraged position in DST properties with 5-10 year balloon mortgages. At best he would have had to replace the mortgages with equal or greater debt upon the DSTs sale. At worst he would be looking at a potential foreclosure if things didn’t proceed as planned at the property and with the economy.

The client opted to invest in a diversified portfolio of Kay Properties’ all-cash/debt-free DST properties. He now had the peace of mind of NOT having to take on debt upon the sale of the DSTs, NOT having the risk of a lender foreclosure and NOT having the risk of a 5-10 year balloon mortgage upon the DST’s sale. Through Kay Properties’ debt free DST properties the client was able to stay in a completely debt free position as well as increase his projected cash flow considerably.

The client was a real estate investor that had previously invested in a basket of student housing, senior care, hospitality, regional mall and oil and gas 1031 properties in 2005 with a broker that touted his group’s due diligence as being second to none. Fast-forward to 2009 and 2010 and the investor lost millions of dollars of equity due to the higher risk nature of these asset classes combined with the great recession and credit crunch.

Result: The client was introduced to Kay Properties and Investments, LLC by a CPA who had been working with Kay Properties for years. The client was able to build a diversified DST portfolio consisting of all-cash/debt-free properties, multifamily apartment properties in growing locations and long-term corporate-backed single-tenant retail properties leased to credit tenants. The client said over and over that he had wished he had been able to invest with Kay Properties the first time around. Since his first 1031 exchange with Kay Properties the client has done multiple subsequent 1031 exchanges into Kay Properties recommended DSTs.

*Diversification does not guarantee profits or protect against losses.

About Kay Properties and www.kpi1031.com

Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market.  Kay Properties team members collectively have over 150 years of real estate experience, are licensed in all 50 states, and have participated in over $30 Billion of DST 1031 investments.

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing.  IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation.  There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed.

Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. Securities offered through FNEX Capital, member FINRASIPC.

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