Kay Properties & Investments Helps Real Estate Investor with High Loan to Value (LTV) Successfully Complete $1.2 Million DST 1031 Exchange Just In Time to Avoid Significant Tax Consequence

After real estate investor was unable to find a suitable replacement property for a 1031 exchange, recommends DST 1031 specialists Kay Properties & Investments coordinate a successful DST 1031 exchange involving a “Zero Coupon” DST offering 

(Torrance, CA)  Kay Properties & Investments recently announced the successful completion of a DST 1031 exchange that involved a crunched timeline and a large debt replacement challenge. With literally days left on his 45-day 1031 identification deadline, the real estate investor was staring at a significant tax consequence that would have impacted his long-term investment strategy forever. However, after contacting Kay Properties & Investments, the investor was able to learn about DST 1031 exchanges and garner outside counsel from his tax attorney and financial advisor. Simultaneously, the Kay Properties team of DST 1031 exchange specialists started to create a customized strategic solution for the client exchange needs. 

“One of the hallmarks of Kay Properties is that our registered representatives never look at any DST 1031 exchange as ‘one size fits all’. Every situation is unique but because of our deep knowledge on the subject, we can find workable solutions for just about any scenario. In this particular situation, we advised the client to consider with his CPA using a Zero Coupon DST to fully offset capital gains taxes on his million-dollar-plus property sale. While not the first time we have had to advise clients to use a Zero-Coupon DST as we have helped clients utilize them for many years, it is an unusual situation and certainly the lesser of two evils compared to having to pay a great deal in taxes,” said Dwgiht Kay, Founder and CEO of Kay Properties & Investments. 

A Zero Coupon DST Offering typically does not include monthly cash flow because any rental income is used to pay the mortgage principal, taxes, and interest each month. In addition, the average zero coupon offering typically has a loan-to-value of anywhere from 70% – 90%, which allows the investor to place a small amount of equity into a DST offering to buy a much larger amount of real estate with long lease terms and hold periods on buildings that typically have investment grade tenants. 

“In this situation, the client was a sophisticated New York real estate investor that was struggling to find quality 1031 replacement properties. He had been searching nationally for replacement properties only to keep coming up empty on viable options. This scenario was exacerbated by the fact that he had a large debt component on the relinquished property that he needed to replace, so getting a mortgage in the tight time frame added to a compounding problem,” said Jason Salmon, Senior Vice President and DST 1031 expert with Kay Properties & Investments. 

Because he was unfamiliar with DSTs, the Kay Properties team helped educate him about the nature of DSTs, including their benefits and respective risks. Then Kay Properties helped him identify several viable DST replacement properties that would work within his 1031 deadline, including a blended mix of real estate that involved placing a portion of his equity into a zero-coupon DST offering while placing the remainder of his proceeds into a more moderate loan to value range of approximately 50%.