We all know that completing a 1031 exchange can be a very daunting task. The 1031 exchange guidelines state that an investor has 45 days after the date of the sale to identify replacement property and then 180 days to complete the exchange. This includes weekends and holidays. Many brokers and investors alike have expressed that this timeline comes very quickly. What complicates matters even more is that many times brokers and their clients are forced to identify properties with many moving parts. Some brokers also have issues finding the right property for their investors that fit their investment criteria and satisfies all their clients’ 1031 exchange goals and objectives. This is where Kay Properties can add value so that you as the broker can not only be a resource for your client, but also be an aid to them to possibly prevent a failed exchange.
For example, Kay Properties recently aided in a transaction for roughly $1 million. The client worked with a well-respected broker with a deep-rooted history of selling commercial real estate. He had several properties identified, but still had available space on his ID sheet (paperwork needed to identify replacement properties) to add DSTs as a back-up. The broker recommended Kay Properties as the firm that could help with the selection of DST properties. Based on our experience with similar transactions, Kay Properties was able to source opportunities that not only would be a back-up, but would also be a viable primary solution considering the client’s goals. Roughly one month after his ID period had ended, the broker gave us a call stating that the properties selected through him had fallen out and their client needed the DST properties that were selected as a backup. He also stated that the client was looking for opportunities with the potential for income. The client was thankful that the broker had set this up as a backup plan, averting what would have been a likely taxable event. DSTs can be closed quickly since they are typically already acquired and waiting for each investor to participate in the offering. As such, the client decided to move forward and was closed in each DST offering within 24-72 hours, completing the entirety of their 1031 exchange.
The above is the experience of one of our clients and may not be representative of the experiences of all clients. It is not guarantee of future performance.
As mentioned earlier, the second way brokers utilize our services is by covering potential “boot” of an exchange. This means that the investor purchasing property through their broker was not able to find enough total real estate value with their proceeds to have a full tax deferral. The 1031 exchange rules state that an investor must place all their 1031 exchange proceeds in order to have a full tax deferral. An example of this was when another broker approached Kay Properties with a client who had roughly $100,000 left over for an exchange that would be considered “boot” and potentially taxable. After a thorough exam of the market, the client decided that DSTs may be a good fit for the $100,0000 of unused 1031 exchange proceeds. The broker contacted Kay Properties to help him and his clients learn more about DSTs. After educating the client about DSTs, the client decided that working with Kay Properties would be an effective way to continue to defer taxable events regarding his 1031 exchange.
This is the experience of one of our clients and may not be representative of the experiences of all clients.This is not guarantee of future performance. Diversification does not guarantee profits or protect against losses.
It is important to remember that brokers are advised to dialogue with us early in their clients’ 1031 exchange process. Engaging us before the client sells their property and enters their 45-day window would be prudent and would give the investor time to understand DSTs and how they could potentially fit into their portfolio of real estate holdings.
Lastly, Kay Properties has many real estate brokers and agents who over the years have themselves sold investment property and decided that a 1031 exchange into DST properties with Kay Properties was the right solution for them. We look forward to discussing how Kay Properties and DSTs might work for you personally and professionally. Please visit www.kpi1031.com to register for access to DST 1031 offerings as well as you will receive a free book on DST 1031 exchange properties.