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Kay Properties Announces Record Second Quarter and First Half of Year Results for 2022 in Total Equity Placed and Number of Transactions Completed on Behalf of Delaware Statutory Trust 1031 Exchange and Direct Cash Investors

Sep 07, 2022 (PRNewswire via COMTEX) -- PR Newswire

TORRANCE, Calif., Sept. 7, 2022

The fully integrated Kay Properties real estate investment marketplace successfully completes $215 million in equity placements for the second quarter and $357.8 million for the first half of 2022, setting new records for the real estate investment firm

TORRANCE, Calif., Sept. 7, 2022 /PRNewswire/ -- Kay Properties & Investments, which operates one of the nation's largest 1031 exchange property and real estate investment marketplaces, announced it has posted record second quarter results after successfully placing $215,450,440 million in equity for accredited investors participating in 1031 exchange Delaware Statutory Trust (DST) investments, Qualified Opportunity Zone Funds and direct cash investments into private real estate offerings. In addition, Kay Properties and Investments also reported record numbers for the first half of 2022 after placing $357,835,409 million for accredited investors.

These numbers represent an increase of 67.57% for the second quarter and 39.89% increase for the first six months of 2022, marking significant progress toward, God willing, another record-breaking year.

Record Number of Transactions for the Quarter and First Six Months of 2022

For the second three months of the year ending on June 30, 2022, Kay Properties also saw a 38.87% year-over-year increase in total number of transactions on the www.kpi1031.com marketplace performed on behalf of accredited investors who invested in DST assets within the multifamily, manufactured housing, single tenant net lease, industrial, self-storage and medical asset classes as well as direct cash investments into other real estate offerings. For the first half of 2022, Kay Properties saw a 24.46% increase in total transactions that translated into more than $357.8 million in placed equity, a large part of which were invested in unlevered/debt-free assets in order to minimize risk potential for investors.

Founded by CEO Dwight Kay, Kay Properties & Investments is considered an expert 1031 Exchange and DST investment firm, providing real estate investment options to high-net-worth clients seeking a passive management structure, and potentially broadening their real estate asset diversification via geography, asset class, and tenant mix.

The firm's results for the second quarter and the first six months of 2022 amplify its belief that Kay Properties has created one of the largest 1031 exchange and real estate investment online marketplaces in the country and generates some of the largest direct to accredited investor investment volume in the United States.

"The www.kpi1031.com online marketplace has truly become a best-in-class robust platform connecting high-net-worth investors with quality real estate offerings as well as a place for real estate sponsors and operators to connect with tens of thousands of high-net-worth investors seeking to deploy capital into real estate offerings. We believe our second quarter results reinforces our belief that the Kay Properties platform creates a perfect match for all sides of the 1031 exchange, DST, QOZ and private real estate investment equation," said Dwight Kay, Founder & CEO of Kay Properties & Investments.

Kay Properties' Successful Business Model Emphasizes Unlevered/Debt-Free DST Assets for Potential Reduced Exposure to Risk

Other notable trends for the second quarter include a growing number of investors across the country being attracted to Kay Properties' business model that was founded on the philosophy of providing custom DST properties and real estate funds using an unleveraged/debt-free strategy, providing investors several potential advantages including no risk of lender foreclosure, no lender prepayment penalties or defeasance costs and no lender cash flow sweeps. This emphasis on providing investments on an debt-free basis also provides greater flexibility to hold through any potential market downturns, credit crunches, recessions and/or depressions.

"We continue to see a growing number of high-net-worth investors recognizing the value of investing in DST properties, private real estate investment funds, and other real estate offerings that operate without the use of borrowed money. In addition, investors continue to be drawn to DSTs as a tax deferral strategy for their 1031 exchanges as well as direct investments into real estate opportunities via the Kay online real estate marketplace at www.kpi1031.com. We wouldn't be in this amazing position if it wasn't first and foremost for the Lord, our amazing clients, and our team members nationwide," stated Kay.

Usually investments are sought out as anchors OR buoys for your portfolio, but DSTs can embody positive traits from both investing styles.

For investors currently considering a Delaware Statutory Trust investment for either their 1031 exchange or direct-cash investment, one of the first things to consider is what investment strategy should be pursued? For example, is the goal to achieve greater appreciation, even if it means investing in an asset that carries greater risk? Or rather is the long-term strategy to have steady monthly income, even if it means lower overall appreciation potential?

Sometimes, investment professionals call this the “anchor and buoy” investment theory. One of the beautiful things about Delaware Statutory Trust investments is that they can potentially provide investors the benefits of both the anchor and buoy investment strategies.

How Can a Delaware Statutory Trust Be a ‘Buoy Investment’?

A Delaware Statutory Trust is a real estate ownership structure that allows multiple investors to each hold an undivided beneficial interest in the holdings of the trust. The term “beneficial interest” means that investors hold a percentage of the ownership, and no single owner can claim exclusive ownership over any specific aspect of the real estate. The laws of DSTs allow the trust to hold title to one or more investment properties that can include commercial, multifamily, net lease, retail, office, industrial, self-storage, etc. 

To better understand how to use the anchor and buoy theory to evaluate potential DST investments, consider a multifamily building that has 500 tenants. First, while residential properties use comparable sales or “comps” to approximate valuation, multifamily properties are also valued based on the amount of net operating income (NOI) they produce. NOI is calculated by subtracting a property’s operating expenses from its gross income.

• Gross income is derived from the sum of all sources of income for the multifamily property. While the vast majority of income comes from rent payments, there could also be ancillary sources of income, such as covered parking fees, laundry/vending income, pet rent income and even rent for storage unit access.
• On the flip side, operating expenses are the costs required to run the multifamily property on a day-to-day basis. Although these amounts vary depending on the type of building, the line items typically will be very similar. These can include utilities, taxes, insurance, maintenance, property management fees and even legal fees.

In this example, the multifamily building has a diversified tenant base of 500 tenants who are paying rent each month. Additionally, because most multifamily assets use an annual lease, landlords have the opportunity to potentially raise rents every year. In addition, any vacancies can provide owners another opportunity to potentially raise rents when filling the vacancy. In this way, multifamily properties act like a buoy, moving and adjusting with the conditions.

While all real estate investments have some form of material risks associated with them, such as interest rate risks, vacancies, general market conditions and financing risks, many investors like assets like multifamily and self-storage because they have the potential to appreciate over time. In addition, multifamily and self-storage are considered good “buoys” to potentially hedge against inflation, because owners can hopefully raise the rents each year to help offset rising costs.

How Can a Delaware Statutory Trust Be an ‘Anchor Investment’?

So, if a multifamily building or self-storage facility are considered “buoy” DST investments, then what is an “anchor” DST investment? Many investors consider a commercial net lease type of asset as more of an anchor investment for their DST 1031 exchange investments. Net lease arrangements are where the tenant pays a portion of or all of the expenses associated with the commercial property, including taxes, insurance fees, and maintenance costs in addition to a base rent.

Net lease properties can be considered more of an anchor because instead of using NOI and market capitalization rates (cap rates) solely as a valuation measurement, most commercial net lease assets are going to additionally tie the valuation of the property with the creditworthiness of the tenant. For example, Joe’s Pizza Shop is not as creditworthy of a tenant as FedEx or Walgreens, both of which are considered investment grade tenants. Joe’s Pizza Shop can shut down, and investors are left with an empty building, which comes with the potential for expensive maintenance costs and unpaid rent.  While it is possible that FedEx or Walgreens can also shut down a location, the odds are that these multibillion-dollar public companies will continue to pay rent as they have investment-grade credit ratings by Standard and Poor’s.

The Kay Properties’ custom multifamily 1031 investment offering in Charleston, SC successfully goes full cycle. *

Key Highlights:

• Kay Properties & Investments custom 1031 exchange multifamily offering in Charleston, SC - exclusively available to Kay clients - goes full-cycle at solid returns for investors.
• Kay Properties & Investments is on track to have another record-breaking year on the www.kpi1031.com marketplace after completing $610 million of equity placed by accredited investors in 2021

(TORRANCE, CA ) Kay Properties & Investments, a nationally recognized Delaware Statutory Trust 1031 Exchange investment firm, announced it has successfully brought another Kay custom 1031 Exchange offering full cycle on behalf of multiple accredited investors. Kay Properties operates its best-in-class www.kpi1031.com marketplace for 1031 Exchange, Delaware Statutory Trust, and other real estate investments from over 25 well-recognized DST sponsor companies.

“Full Cycle” is the name used to describe an investment real estate offering that is purchased and then sold on behalf of a group of accredited investors after a period of time.

According to Dwight Kay, founder and CEO of Kay Properties & Investments, the property, a multifamily asset located in Charleston, SC sold to a third party for approximately $57,000,000 after being provided to Kay clients at an offering amount of approximately $43,000,000.

“The property was offered to accredited investors as a 1031 Exchange opportunity or a direct cash investment on the www.kpi1031.com marketplace. We are very pleased to have provided another successful custom 1031 investment opportunity for our clients that resulted in a very profitable full-cycle liquidity event,” said Kay.

“While past performance does not guarantee or indicate the likelihood of future results, this particular 1031 Exchange-eligible investment is a solid example of how Kay Properties’ clients have access to Custom offerings that are only available to investors working with Kay Properties. It was made available to Kay Properties clients on kpi1031.com as a Custom offering and successfully sold for an attractive total return for our investors. The positive return marks yet another significant victory for our investors and another successful outcome for the entire Kay Properties team during this record-breaking year*.As always, we encourage investors to read each Private Placement Memorandum (PPM) prior to investing and to pay careful attention to the business plan and risk factors sections of the PPM prior to making any investment on the www.kpi1031.com marketplace,” said Kay.

Chay Lapin, President and DST and 1031 Exchange specialist with Kay Properties & Investments, explained that because of the unique nature of the Charleston region and the robust economic engine relating to the Port of Charleston, this 1031 Exchange asset was a particularly attractive investment for Kay Properties.

“We originally were attracted to this asset because we saw there was a great opportunity for a Class A multifamily asset located in vibrant Charleston, South Carolina -a seaside city steeped in history, culture and charm that is also the second largest city in South Carolina.

Like all our 1031 Exchange investments found on www.kpi1031.com, this asset was carefully vetted by the Kay Properties team of due diligence and analytics experts before we made it available as a 1031 Exchange eligible custom investment for our Kay Properties investment family. Although the past performance of any investment doesn’t ever guarantee future results or returns, the offering performed incredibly well for many of our loyal investors*,” said Lapin.

To view the original article, please visit: https://finance.yahoo.com/news/kay-properties-leading-delaware-statutory-121700174.html

Kay Properties & Investments Announces Best First Quarter Results Ever for Both Equity Placed and Number of Delaware Statutory Trust and Real Estate Investment Fund Transactions Completed

TORRANCE, Calif., June 28, 2022 /PRNewswire/ -- Torrance, CA-based Kay Properties, which operates one of the nation's largest 1031 exchange property and real estate investment marketplaces, announced today it had posted a record first quarter after successfully placing $141,621,871 million in equity for accredited investors participating in 1031 exchanges, Qualified Opportunity Zone Funds and direct cash investments into real estate offerings. This amount represents an 11.32% increase over the first quarter of 2021, and indicates Kay Properties is once again on its way toward a record-breaking year.

For the first three months of the year ending on March 31, 2022, Kay Properties saw a 37.9% increase in the total number of transactions performed on behalf of accredited investors who invested in DST assets within the multifamily, manufactured housing, single tenant net lease, industrial, self-storage and medical properties nationwide as well as in Qualified Opportunity Zone Funds (QOZs) and direct cash investments into real estate offerings.

Founded by CEO Dwight Kay, Kay Properties & Investments is considered an expert 1031 Exchange and DST advisory firm, providing real estate investment options to high-net-worth clients seeking a passive management structure, and potentially broadening their real estate asset diversification via geography, asset class, and tenant mix.

The firm's first quarter results amplify its belief that Kay Properties has created one of the largest 1031 exchange and real estate investment online marketplaces in the country and generates some of the largest direct to accredited investor investment volume in the United States.

"The kpi1031.com online marketplace has truly become a best-in-class robust platform connecting high-net-worth investors with quality real estate offerings as well as a place for real estate sponsors and operators to connect with tens of thousands of high-net-worth investors seeking to deploy capital into real estate offerings. We believe our first quarter results reinforces our belief that the Kay Properties platform creates a perfect match for all sides of the 1031 exchange, QOZ and real estate investment equation," said Dwight Kay, Founder & CEO of Kay Properties & Investments.

Other notable trends for the first quarter include a growing number of investors across the country being attracted to Kay's custom DST properties and real estate funds found on the Kay online real estate marketplace as direct cash investments.

"We continue to see a growing number of high-net-worth investors participate in the offerings on the company's marketplace with direct cash investments, a trend that we are seeing growing tremendously. Investors continue to be drawn to DSTs as a tax deferral strategy for their 1031 exchanges as well as direct investments into real estate opportunities via the Kay online real estate marketplace at www.kpi1031.com. We wouldn't be in this amazing position if it wasn't first and foremost for the Lord, our amazing clients, and our team members nationwide," stated Kay.

As founder and CEO of Kay Properties, I talk with hundreds of clients each month, allowing me the privilege of listening to some fascinating life stories while helping people with their long-term investment goals. I recently encountered such a story when I met Frederick and Gloria*.

These two focused individuals met at Georgia State University. After graduating, they found jobs in Atlanta: Frederick as an accountant for a major home-improvement chain and Gloria as a history teacher at an Atlanta middle school. Eventually, the two decided to marry and begin a life together.

Neither Frederick nor Gloria came from wealthy families, but they both had a vision for building wealth and a plan for how to do it. Frederick’s background in accounting and finance taught him that one of the best ways to create wealth was through real estate while also deferring capital gains taxes. Through her love of history, Gloria also understood that the vast majority of the people in the United States who achieved financial success had done so through owning real estate.

So, the two sat down and plotted out a long-term, three-phase plan for entering the investment real estate world.

Building a Real Estate Portfolio in 3 Phases

Phase 1: The Purchase of Their First Rental Property

The first step in their plan was to invest in a single-family home rental property. Even though they understood there would be very little cash flow from this and money would be tight, they also knew that this first step, the entry point into real estate investing, would be the most important one for them in the long term.

Frederick flashed a big, proud smile when he told me that he knew at a very young age that while the cash flow would be minimal at best, they had youth on their side – both in years and in real estate experience, and they would use this investment property as a way to gain valuable experience.

The two also knew that even with a small down payment and large loan, the money was a secondary hurdle to achieving financial independence. The first hurdle they had to jump was to overcome inertia and the urge to overanalyze, and just make the move.

This is an interesting point, and I’ve heard it before from other experienced real estate investors.  When entering into the first phase of building a real estate portfolio, novice investors should not expect to find phenomenal deals or that one will just fall out of the sky. Frederick, too, believed the best strategy for acquiring anything in business was to emphasize the business strategy first over the financial strategy, then find a decent deal and move forward to secure it.

In the case of Frederick and Gloria, they knew the greater Atlanta market well, and with a handle on financing and basic accounting, Frederick also knew his numbers. He carefully detailed what their monthly expenses would be, including paying principal, interest, taxes, insurance and maintenance and what kind of rent they would have to receive to make the investment work.

After spending almost a year saving and searching, and with a little help from their parents, Frederic and Gloria purchased their first rental home – a small two-bedroom, one-bath house in the Atlanta suburbs, for approximately $62,000. While the numbers are only used as examples, the scenarios surrounding them are relatively accurate. For example, since they bought their first investment house in 1983, stagflation and high energy prices forced interest rates to reach nearly 13%. The total monthly payments on a 30-year loan were $442, and they were able to rent the house for $575.  It was tight, but they watched their pennies, and soon the rental property started to appreciate as they paid down the principal, which helped them build equity.

Phase 2: Building Cash Flow and Realizing the Tax Advantages of Rental Real Estate

Over the next decade, Frederick and Gloria worked hard at their jobs, gaining promotions and raises. Along the way, they refinanced their rental property, drastically reducing their interest payments and allowing them to pull out cash — which they used to strategically acquire more rental properties. In 10 years, they had grown their portfolio to six single-family homes strategically located throughout the Atlanta market.

These six homes together created a much better cash flow picture (approximately $9,500 a month), but because the two had carefully created a long-term real estate investment plan, they understood that Phase 2 was not only about increasing cash flow, it was also about reducing their taxable income, which would reduce their tax bill at the end of the year.

One way Frederick knew he could significantly reduce his tax liabilities during these years was to gain a real estate professional status (REPS). After considerable research, Frederick learned that the IRS considers anyone who fulfills these three conditions to be a REPS:

1. Over half of the personal services you perform during the tax year were in your real estate business.
2. You worked more than the minimum threshold of 750 hours during the tax year in real property trades or businesses.
3. You are actively involved in managing real estate investments. This includes buying and renting out commercial buildings or apartments and being involved in the day-to-day management of these properties.

Having spent every available hour developing his real estate portfolio over the past 20 years, Frederick easily qualified for this status and began reducing his taxable income by writing off significant passive losses, such as depreciation. As a result, the couple were not only building equity and realizing a moderate monthly cash flow through their rental properties, they were also sheltering their personal income.

Instead of paying 35% of their salaries to the government, they dropped their tax bill down to 15%. That included both their real estate income and salary income, which they continued to plow back into their growing real estate business.

As a result, Frederick and Gloria used their rental properties to double their net worth approximately every five years.

Phase 3: 1031 Exchange Exit Strategy to Defer Capital Gains Taxes and Preserve Wealth

Interestingly, Frederick and Gloria recently celebrated their 35th wedding anniversary. After working 50 hours a week with their full-time jobs and managing their six rental properties, they decided it was time to sell their real estate portfolio, step away from active management and live off the proceeds.

One of Frederick’s and Gloria’s neighbors was a real estate broker named Sue. They gave her a call to discuss selling some or all their real estate assets in the current sellers’ market. Two weeks later, the two received an estimate of what their portfolio was worth and were surprised to realize the total was $3.5 million.

But what about the taxes, they wondered?

Capital Gains Shock: Enter Chuck, the CPA

Frederick and Gloria had worked with Chuck (their CPA) for years, so they called him to get an idea of what kind of a tax event they would be looking at. After looking into Frederick’s and Gloria’s situation, Chuck explained that if they sold their portfolio, and paid the depreciation recapture tax of approximately 25% (of the depreciation they had previously written off), their federal and state capital gains tax of 20%, and their net investment income tax, or Medicare Surcharge Tax, of 3.8%, they would be looking at a tax bill of more than $350,000.

That number was unnerving, and while they were familiar with the 1031 exchange, they were not interested in reinvesting into another piece of property that would still require active management duties. They wanted a tax-deferral strategy that offered passive asset management and diversification.

That’s when Chuck recommended the couple investigate a Delaware Statutory Trust, which qualifies for 1031 exchanges and accomplishes the specific investment goals the two were looking for.

Chuck explained that like a 1031 exchange, all capital gains and other taxes would be deferred as long as they could find like-kind properties. But, a Delaware Statutory Trust also allows investors to 1031 exchange into potentially high-quality institutional-caliber real estate assets, eliminating active management while still potentially receiving a monthly income.

Frederick started researching DST 1031 exchanges, and he found that the Delaware Statutory Trust was established in 2004 and is covered in IRS Revenue Ruling 2004-86. He further discovered that the DSTs he had researched averaged around $100 million in value, and that, in many cases, DST properties were offered and operated by many large real estate firms nationwide. He was surprised to learn that over the past several years, billions of dollars of investors' equity had been moving into DSTs via 1031 exchanges as investors had caught on to the attractiveness of this time-tested strategy.

The notion of completing a DST 1031 exchange fit with Frederick’s and Gloria’s Phase 3 goals and objectives of their real estate investment journey. But with six different properties to sell, they were facing six different 1031 identification and closing deadlines. It was too much for Frederick, Gloria and even Sue to fathom.

Frederick decided to look for a DST 1031 specialist firm.

DST Specialist Helps Complete DST 1031 Exchange and Achieve Long-Term Strategy

That’s when they called me. For more than a year, we spoke together at length about various DST investment strategies and property options. I explained that real estate investments always present risks. They then developed a flexible business plan that included six properties in individual exchanges that could be adjusted when sales were delayed or deals changed.

It was during this time that I learned about their fascinating story. The thing about Frederick was that he worked in finance for a large company, so he really wanted to explore and study subjects himself. He would do his research, and we’d all get together for a call or video conference.

Frederick and Gloria consulted their CPA, tax attorney, children and even their friends and neighbors. After they were fully educated and comfortable with their options, they decided to start selling their portfolio and moving the proceeds to a 1031 Qualified Intermediary, and then to the DST sponsor companies that offered the targeted DST investment properties.

The DST advisory firm conducted thorough due diligence on each prospective DST property, including the macro and microeconomics, the assets and markets, the financing and the past performance of the sponsor companies. Through this type of detailed analysis, Frederick and Gloria had all their questions answered and felt comfortable with moving forward.

In the end, the couple sold their entire portfolio within two months, following a carefully laid out business plan that calculated multiple 1031 exchanges across a multitude of real estate asset classes, including debt-free multifamily properties, debt-free self-storage facilities, a debt-free medical building and debt-free net lease buildings.  And instead of a $350,000 tax bill, they paid nothing.

Now the couple enjoy a passive management structure with regular monthly income, and more time to spend with their children and future grandchildren.

*Note: While the events and scenario described in the following article are factual, the names and details have been altered to provide anonymity.

Kay Properties Delaware Statutory Trust and 1031 Exchange Expert, Jason Salmon Invited to Speak During New Jersey Real Estate Capital Markets Conference on Tuesday, June 21 in Edison, NJ

TORRANCE, Calif., June 20, 2022

Betty Friant CCIM is SVP and expert DST 1031 advisor for Kay Properties & Investments.

No question about it; these are turbulent times. Just read the headlines of pretty much any major news outlet, and you will be deluged by stories that would rattle even the calmest of nerves. Unsettling events are happening both globally and domestically. These events don’t just impact the psyche; they also can have significant financial consequences for all types of investors and entrepreneurs. For example, I know several business owners who were devastated by Covid-19 and forced to close their businesses. Because they owned the real estate where the business operated from, and because that real estate had appreciated over the years, they decided to sell their real estate assets. Similarly, many real estate entrepreneurs who invested in multi-family properties over decades have been negatively impacted by rent controls and eviction moratoriums and have similarly decided to relinquish their real estate holdings.

In both cases—business owners selling their buildings and real estate investors selling their rental properties—as a financial advisor, I encourage my clients to consider all-cash/debt-free Delaware Statutory Trust (DST) assets when entering a 1031 Exchange in order to reduce risk.

What is a debt-free Delaware Statutory Trust asset?

For those unfamiliar with the term, entrepreneurs and real estate investors don’t have to live in Delaware to invest in DSTs; Delaware was simply the state where the law defining a DST and its structure was created. This special kind of real estate investment vehicle has been blessed by the IRS to qualify as “like-kind” investment property for the purposes of a 1031 exchange.

It’s striking to me that most investors entering into a DST 1031 Exchange investment are incredibly focused on the specific asset in question. Whether it’s a multifamily building in Houston or a logistics/distribution facility in Gulfport, investors are typically well-versed with the location, income potential and type of tenant. However, what they sometimes overlook is what type of financing is in place for the investment property.

One of the ways investors can potentially reduce their exposure to risk—especially in turbulent times—is to avoid taking on any additional debt. While many 1031-eligible assets have debt associated with them, and not all debt is bad, many investors want to remain debt-free and take a conservative position on their 1031 investments. Many of my clients don’t want to increase their debt load, as many of them have already paid off their investment properties or business real estate assets and they just don’t want to go back into debt. This is the time in their lives when they want to reduce their exposure to potential risk and not increase it. Debt-free DSTs offer the perfect opportunity to invest in multiple asset classes and in different geographical regions without incurring debt.

Four reasons to consider this type of investment

If there’s one thing we’ve learned during the Covid-19 pandemic, black swan events can drastically alter economic patterns. Think about iconic brands that went bankrupt in 2020 (though some later emerged): Brooks Brothers, Guitar Center, JCPenney, Neiman Marcus and Pier 1. Entrepreneurs who decided to invest in single tenant-net lease buildings often faced a harsh reality after the businesses there went bankrupt or out of business and were unable to pay rent.

2. All-cash/debt-free DSTs can offer better cash flow potential.

With no monthly debt service to a lender, the all-cash/debt-free DST potentially can pay larger monthly distributions to investors.

3. All-cash/debt-free DSTs provide investors and entrepreneurs the ability to diversify a portion of their 1031 Exchange dollars into unlevered asset to lower potential risk

Many entrepreneurs who have invested heavily in the stock/bond markets turn to all-cash/debt-free DST properties as a strategy to diversify away from stocks and bonds.

4. All-cash/debt-free DSTs can help protect entrepreneurs and investors from the financial catastrophe of a complete loss of their principal due to a lender foreclosure.

While it is not common, investment property foreclosure can and does occur, causing investors to lose their entire investment. However, with all-cash/debt-free DST investment, investors never have to worry about a lender foreclosure because there is no monthly debt service attached to the investments.

Times are indeed turbulent, but considering all-cash/debt-free DST investments might be a good way to reduce investment risk and avoid lender foreclosure.

The all-cash/debt-free distribution facility DST offering in Winston-Salem, NC goes full cycle to post total returns of 126.72% for Kay Properties accredited investor

TORRANCE, Calif, May 26, 2022 /PRNewswire/ -- Kay Properties & Investments, which operates one of the nation's largest 1031 exchange investment marketplaces at www.kpi1031.com, announced it had successfully brought one of its custom Kay Properties DST offerings full cycle on behalf of multiple 1031 exchange and cash investors.

Kay Properties & Investments Delaware Statutory Trust Investment Delivers 126.72% Returns to Accredited Investors

"Full Cycle" is the name used to describe a Delaware Statutory Trust property that is purchased and then sold on behalf of a group of accredited investors after a period of time. For example, Kay Properties recently brought this Tacoma Data Center full cycle in similar fashion.

According to Dwight Kay, founder and CEO of Kay Properties & Investments, the Winston-Salem industrial distribution facility DST, sold on behalf of a group of DST accredited investors who, for those investors that closed simultaneously on the DST investment the day that the property was purchased, realized a 126.72% total return, or a 7.19% percent annualized return from their DST 1031 investment*.

"We are proud to have provided another successful custom DST investment opportunity to our clients that resulted in a quality full-cycle return. While past performance does not guarantee or indicate the likelihood of future results, this particular investment is a great example of how Kay Properties' clients have access to custom DST offerings that are exclusively available to investors working with Kay Properties. The DST offering was made available to Kay Properties clients as a custom DST investment in 2018 on our kpi1031.com platform, and successfully went full cycle in 2022. The positive return marks a significant victory for our investors and another successful outcome for the entire Kay Properties team as we approach, God willing, another record-breaking year*," said Kay.

Kay explained that Kay Properties & Investments offered this custom DST to both 1031 Exchange and direct cash investors.  The DST investment included a 30,947 square foot distribution facility that was located in a dense industrial corridor surrounded by numerous distribution-related tenants and just one mile away from Wake Forest University. In addition, the industrial property was 100 % leased to an investment grade tenant with a BBB rating by Standard and Poor's, and was available to accredited investors as an all-cash/debt-free DST offering that provided investors no risk of lender foreclosure.

Chay Lapin, President and DST specialist with Kay Properties & Investments, explained that the combination of a favorable location that was also secured by a long-term lease that was corporately guaranteed by a national tenant, and with an attractive price point per square foot made this industrial distribution facility DST a particularly attractive investment for Kay Properties.

"We originally acquired the Winston-Salem industrial property approximately four years ago because we saw the asset possessed core real estate value with a stable, investment grade tenant, and strategically connected to Smith-Reynolds Airport via a major transportation artery running through the heart of the Winston-Salem sub-market," said Lapin.

The combination of the DST and the QOZ investment successfully helped the family achieve three specific investment objectives:

1. Create a purely passive and management free real estate portfolio with the potential to generate monthly income.

2. Build a significantly more diversified real estate portfolio with assets located across multiple geographic regions, throughout multiple real estate asset classes, and tenanted by multiple business verticals.

According to Dwight Kay, Founder and CEO of Kay Properties, while this transaction involved two separate types of tax deferral strategies, the primary focus was first to complete the 1031 exchange within the required timeframe.

"Because this was a large DST 1031 exchange involving multiple assets, the first thing the Kay Properties team of experts needed to focus on was to identify a number of replacement DST properties that fit into the investor's long-term investment strategy," said Kay.

These included a mix of multifamily, single tenant net lease, and medical that were located across multiple geographic regions, across multiple asset types with different tenants, and multiple DST sponsor companies.

Qualified Opportunity Zone
Following the successful completion of the Delaware Statutory Trust 1031 Exchange, the client then decided to sell the business in a separate transaction and invest in a Qualified Opportunity Zone (QOZ) as an additional tax deferral strategy.

Betty Friant, Kay Properties Senior Vice President is an expert in Qualified Opportunity Zone investment strategies and took the lead on advising the client on how to leverage the benefits of the QOZ vehicle.

"Before the qualified opportunity zone legislation, when you sold a business, you usually couldn't write it off, and you had to pay your taxes. But with Qualified Opportunity Zones, if you have a capital gain from the sale of a business or stocks or other appreciated assets, you can defer the taxes on the gain of that sale and keep the basis to use any way you want. The Qualified Opportunity Zone fund must remain active for at least 10 years for the investor to receive a stepped-up basis on any gain from the opportunity zone project, so it might be possible that no taxes are due on those funds," said Friant.

According to Friant, the ability to convert real estate assets into a tax deferred DST 1031 Exchange, and then convert the gains from the sale of the business into a QOZ is a direct example of why Kay Properties & Investments is considered one of the most experienced and hyper-client-focused real estate investment firms in the nation.

"Very few real estate brokers, CPA's, or even real estate attorneys have as much experience in complicated 1031 Exchanges like this. We always encourage our investors to speak with their CPA and attorney for guidance regarding their particular situation and invite their CPA or attorney to be on the calls with the QOZ sponsor companies to learn more about how the QOZ works. In the end, we often have CPA's and attorneys who personally invest with us on the www.kpi1031.com marketplace when looking for alternative investments that might provide real estate write offs, deductions, and tax deferrals," said Friant.

The 96-page glossy magazine dissects present-day investment themes and explores investment strategies for today's 1031 Exchange and DST real estate investor.

TORRANCE, Calif., April 11, 2022 /PRNewswire/ -- Kay Properties & Investments, a national leader in Delaware Statutory Trust equity placements and in educating DST investors nationwide, announced it recently published its exclusive 1031 DST Digest magazine, a publication designed exclusively for 1031 Exchange and Delaware Statutory Trust investment strategies and education.

According to Dwight Kay, Founder/CEO of Kay Properties and editor of the magazine, the 1031 DST Digest was designed to help educate investors on the DST 1031 Exchange marketplace, while also answering specific questions his firm's team of expert representatives hear from investors daily.

"Inside this accessible magazine, readers will find out what makes Delaware Statutory Trust 1031 investments so popular, how to build a defensive DST real estate portfolio, and how DSTs help investors replace debt in a 1031 Exchange. The magazine is offered free of charge as part of our commitment to providing educational resources to 1031 exchange DST investors nationwide. Request your complimentary copy today and in addition to a print version delivered to your doorstep, you'll also receive instant access to an electronic version of the magazine." said Kay.

People can receive a copy of the limited-edition periodical by going to https://www.1031dstdigest.com.

"The intent of the 1031 DST Digest magazine is to help educate existing and potential clients about DST 1031 properties, the potential benefits and risks of DST investments and whether they might be a right fit for investors considering a 1031 exchange," said Kay.

Specifically, the Kay Properties "1031 DST Digest" will cover topics like :

• How 1031 Exchanges into Delaware Statutory Trust Investments Can Unlock More Quality Time for Investors

• Why Now Might be a Good Time to Sell the Income Property you Love

• What Real Estate and DST Investment Opportunities Should be Considered after the Pandemic recedes?

While today’s rental property owners are facing challenges and pressures they have never seen before, there are alternative investment strategies that should be considered.

By Dwight Kay, Founder and CEO of Kay Properties & Investments

Historically speaking, independent real estate investors, who held for the long-term, walked a relatively straightforward (although bumpy and slow at times) path toward achieving asset appreciation and long-term wealth. This path would often look something like this: an investor would purchase a piece of property that would potentially generate enough cash flow to cover the expenses, including principal and interest on the mortgage, insurance, property taxes, and maintenance costs. Over time, the property would (hopefully) increase in value, income (rents) would rise, and certain tax advantages like the ability to deduct operating and depreciation expenses could be utilized to improve cash flow.

However, the steady march of new government regulations, the impact of COVID-19, and some basic real estate economics have helped some real estate investors recognize that the real estate investments they own have become less profitable and could even worsen to the point where investors could actually be losing money each year.

The Growing Impact of Rent Control Before and After COVID-19

While this may sound like hyperbole to some, our firm is actively working with numerous apartment owners across the country, and we hear first-hand some of the challenges and pressures property owners are facing. Even national media are picking up on this trend. For example, arecent Wall Street Journal article cites that apartment owners and investors are leaving California and the northeast for places like Florida, Texas and the other southern states where the warm weather, business-friendly governments and laws, lower taxes and fewer regulations seem like a breath of fresh air. Reuters recently lamented that beset by COVID-19 and its fallout, many smaller local landlords are offloading their properties and selling to national institutional investors, and CNBC recently reported that at least 60 percent of single-family rental homeowners are owed back rent and are being forced to sell their rental properties to recoup losses. Finally, CBS announced that as a last ditch effort to claw back tens of billions of dollars in unpaid rent, a national group of landlords is suing the Federal government for back rent.

However, even before COVID-19 rolled across the nation’s multifamily rental real estate investment market, landlords were seeing new rent control legislation start to encroach on their investment real estate portfolios, and squeeze owners’ profits. However, when COVID-19 arrived in the United States, cities across the country started expanding rent control laws and eviction moratoriums at an alarming rate, directly exposing landlords to financial peril. Legally speaking, the term “rent control” can be defined as any statutory rule that regulates the timing or frequency of increasing tenants’ rent, the services landlords must provide tenants, and the limited ability of landlords to evict tenants.

Today, multiple cities, states and jurisdictions are under some form of strict rent control regulation, including Washington D.C., Maryland, New Jersey, and New York. Most recently, the states of Oregon and California have enacted statewide rent-control laws that have greatly reduced landlords' ability to raise rental rates. Cities like Santa Ana and St. Paul have both passed bills limiting rent increases to 3% a year. Seattle even passed a bill requiring landlords to pay the moving costs for tenants who can’t afford to stay in their homes, and the City of Los Angeles passed a law that protects tenants from eviction for unpaid rent. Perhaps no other region in the nation is more challenging for landlords than California’s Bay Area. For example, the City of Berkely has had one of the strictest rent control environments in the country capping not only rents, but also garbage and parking fees; Hayward caps rent at just 5 percent and rent increases following voluntary move-outs cannot be more than 5 percent; Oakland’s Rent Adjustment Program (RAP) limits rental increases to 30 percent in a five-year tenancy.

Even more worrisome for landlords, cities like Portland and Oakland have recently created new restrictions that limit the ability of landlords to screen potential tenants, including

• Prohibiting the use of criminal background checks
• Limiting the use of financial background checks
• Requiring landlords to accept of previously evicted tenants
• Limiting security deposits to 1.5 x month's rent

Adding to these growing restrictive rental laws, landlords today must also face the reality of complicated and costly eviction laws and the soaring costs associated with repairs and maintenance.

Finally, many owners are recognizing that perhaps their rental property may not make as much financial sense as it once did. Why is this?Well, for several years now, property values in certain situations have risen faster than an owner’s ability to raise rents. The result is that the cash-on-cash return or “equity yield” gets compressed the higher property values rise. In some cases, this cash-on-cash return can be squeezed from a double-digit return to a low single digit return. Add to this the uncertain factors like inflation and unemployment, higher taxes, and a softening rental market, combined with city and government-imposed rent control and eviction moratoriums and more landlords are coming to the conclusion that now might be potentially a good time to sell their investment real estate.

Enter the Delaware Statutory Trust and Passive Real Estate Investing

So why don’t rental owners simply take their equity positions and cash out? The simple answer because of the tax liabilities, including Federal Capital Gains (15-20%), State Capital Gains (0-13.3% depending on the state he/she lives in), Depreciation Recapture Tax (25%) and the Medicare Surtax (3.8%) will now be due upon sale. These associated taxes could potentially take up to 40 percent of the asset’s sale price out of the seller’s proceeds. However, while it is true that a 1031 Exchange would allow them to defer their taxes, it is also true that they would most likely be limited to exchanging into another multifamily building or a single-tenant NNN building. What’s the problem with these assets? Nothing, except investing in another multifamily building doesn’t offer the owner much diversification, and because the proverbial “3 T’s” of tenants, toilets, and trash will still be involved, there will always be headaches and management expenses involved. A single-tenant net-lease property relies heavily on the quality of that sole tenant, and if that tenant fails, the investor’s income is likely to be reduced or eliminated completely (during COVID-19 there were a number of NNN tenants that went bankrupt or sought rental relief from their landlords). Also, triple net lease properties can be hard to locate, and conducting proper due diligence can be very difficult to accomplish within the time frame of 1031 exchange.

That’s why many landlords are utilizing Delaware Statutory Trust (DST) 1031 Exchanges to exit the active management role of owning rental real estate.DSTs are a form of fractional ownership that can be used to make passive investments in real estate and achieve monthly income potential via ACH direct deposit and diversification across multiple assets. Also, because DSTs are eligible for 1031 Exchanges, investors can sell their investment property and reinvest the proceeds into one or more DST investments while deferring capital gains and other taxes.

Another reason DST investments are popular among real estate investors is because many types of diverse real estate assets can be owned in a DST, including industrial, multifamily, self-storage, medical and retail properties. Also, it is not uncommon to find properties within a DST investment include institutional quality assets like those owned by large investment firms such as a 450-unit Class A multifamily apartment community or a 100,000-square-foot industrial distribution facility leased to a Fortune 500 logistics and shipping company.

In addition, Delaware Statutory Trust 1031 Exchanges offer real estate investors the following specific benefit potential as well:

• The ability to close their 1031 Exchange within typically 3-5 days
• The opportunity to eliminate the hassles of tenants, toilets, and trash (i.e. the Three T’s).
• The potential to receive regular monthly distributions via ACH direct deposits
• The ability to access institutional grade real estate assets
• The potential advantages associated with greater portfolio diversification by geography, tenants, and asset class*

The Bottom Line

Investment properties have gone through significant changes over recent years, and in many cases, owners have been faced with challenges they have never seen before, including the COVID-19 pandemic, and ensuing eviction moratoriums. For qualified property owners who are motivated to sell in the near future and are facing capital gains, reinvesting the proceeds in qualifying properties including DSTs will allow them to not only defer capital gains taxes but also become part of a diversification* strategy with the potential for appreciation and monthly income.

Dwight Kay

Founder and CEO, Kay Properties and Investments, LLC

Dwight Kay is the Founder and CEO of Kay Properties and Investments LLC. Kay Properties is a national 1031 exchange investment firm. The www.kpi1031.com platform provides access to the marketplace of 1031 exchange properties, custom 1031 exchange properties only available to Kay clients, independent advice on sponsor companies, full due diligence and vetting on each 1031 exchange offering (typically 20-40 offerings) and a 1031 secondary market.

After deciding to retire and step away from actively managing a $10 million real estate portfolio, successful medical professional turns to Kay Properties to help evaluate DST properties for his 1031 exchanges.

(Torrance, CA) Kay Properties & Investments, a national leader in Delaware Statutory Trust investments recently helped a retiring physician complete a series of DST 1031 exchanges totaling more than $10 million in order to achieve passive management and greater potential diversification. *

According to Dwight Kay, Kay Properties founder and CEO, the investor was introduced to Kay Properties through his Certified Public Accountant (CPA) who recommended the firm because of their extensive marketplace of DST 1031 property options, their reputation of putting integrity and clients’ interests first, and their nationally recognized expertise in DST 1031 exchange investments.

“After the client contacted us, we spent the next year introducing him to and educating him and his family on DST 1031 exchange investments. We provided him educational material, spent many hours on phone calls with him, and conducted multiple in-person meetings to help him understand how DST 1031 exchanges could potentially help him achieve his investment objectives. As is our practice with all investors, it was important for us to also emphasize the potential risks associated with DST 1031 exchange investments. In the end, our team of DST experts worked with him to create a diversified portfolio of all-cash/debt-free DST properties that potentially met his needs and investment objectives,” explained Kay.

In addition, Kay explained that because of the amount of time his team of hyper-specialized DST experts spent with the client over the course of a year, the client and Kay Properties were able to identify and reserve the exact exchange properties he wanted ahead of time, and successfully completed the exchange within just 5 days of closing on the relinquished property.

According to Kay Properties Vice President and DST 1031 exchange expert, Steve Haskell, the client had spent the past 25 years successfully assembling a multimillion-dollar real estate portfolio of multifamily buildings and single-family homes that he actively managed. However, when he decided to retire to spend more time with his grandchildren and travel the world, he wanted to shift from the day-to-day activities of toilets, trash, and tenants, and enter a passive real estate management structure that would allow him access institutional grade investments while also achieving the potential for regular monthly distributions. In addition, his entire portfolio was heavily concentrated in one submarket, so he also wanted to achieve greater geographic diversification** as well.

“This gentleman was not only a successful physician, he was also a successful part-time real estate professional who had made his wealth locally by doing his own deals and performing his own property management tasks. When it was time for him to retire, he decided to liquidate his portfolio and pursue DST 1031 investments. Plus, from an investment standpoint, he was concentrated in both multifamily and single-family types of assets in a single local submarket. So, we worked closely with him to help create a blended portfolio that included higher quality real estate assets across seven markets nationwide to help him achieve the potential of greater diversification**. And instead of being in a single asset class, we helped him invest into five different asset classes, that included self-storage, medical, industrial, Class B multifamily and manufactured housing.” said Haskell.

However, Haskell feels that as important as the actual transactions, this investor valued the educational process that Kay Properties provided him leading up to his multiple 1031 DST exchanges.

“It really is important that our clients completely understand the DST 1031 structure and the potential risks associated with any real estate or DST investment. In this case, because of the amount of time and education we were able to provide him, this investor was very pleased and appreciative of the Kay Properties business model. We spent the necessary time with him to understand their objectives, goals and risk tolerances and worked tirelessly with him and his CPA to build a 1031 exchange DST solution that would potentially achieve those objectives,” said Haskell.

*Diversification does not guarantee profits or protect against losses.

Large institutional real estate investment firm uses Kay Properties to help complete four - $30 million DST 1031 investments to help create greater portfolio diversification.

(Torrance, CA) Kay Properties & Investments, a national leader in Delaware Statutory Trust equity placements, recently announced it worked closely with a large institutional real estate investment firm to perform a series of test investments prior to helping the client complete multiple DST 1031 exchanges totaling $100 million.

According to Dwight Kay, Founder and CEO of Kay Properties, the institutional investment firm decided to strategically relinquish a portfolio of four large retail assets and invest in custom DST 1031 exchange portfolios in order to help them become potentially more diversified. A significant caveat to their investment strategy, however, was to enter into smaller investment transactions as part of a “test investment” strategy.

“Kay Properties is widely recognized as the number one leader in placing 1031 exchange equity for every sized accredited real estate investor. In this case, we were contacted by a large institutional real estate investment firm who ultimately wanted to liquidate its $100 million portfolio of retail investment properties to potentially achieve greater diversification for its investors. The Kay Properties investment team spent more than a year educating them and introducing them to different sponsors that we work with, and carefully going over the risks, benefits and structure of DSTs, and even facilitated several test investments with them before they decided to invest a larger component of their portfolio with us,” said Kay.

Steve Haskell, Vice President with Kay Properties spearheaded the interaction with the client, and explained that while they were more sophisticated than many real estate investors, they still required a lot of education and insisted on testing out the Kay Properties DST 1031 exchange platform before placing larger investments with the firm.

“It is not uncommon for investors of all sizes to want to test our processes and platform before placing a large investment amount with us. In this case, the investment firm wanted to watch our paperwork and look at how we operated as an advisory firm, while also evaluating the DST structure as an investment vehicle. They also wanted to make sure we always ‘dotted our i’s and crossed our t’s’. We obviously performed as we do with all our clients - professionally, honestly, and always being forthright regarding potential risks of DSTs,” said Steve Haskell, Kay Properties Vice President and recognized DST 1031 exchange expert.

According to Haskell, during these test investments, Kay Properties was also introducing them to numerous sponsors, and helping them create a portfolio that fit their specific investment criteria.

“Because we had been working with them for more than a year, we were able to have properties they wanted already set up and reserved so that they could close on their DST 1031 exchange literally the same day they closed on their relinquished assets,” explained Haskell.

As a result, Kay Properties helped the investment firm successfully close on multiple DST portfolios in various types of real estate asset classes, in different geographic locations, and across a variety of tenants to help achieve greater diversification, passive management, and the potential for monthly distributions.

“The client was impressed with every facet of the Kay Properties business model, and felt like they accomplished what they wanted to do from an investment perspective,” said Haskell.

This continued record growth represents a 49.5% percent increase over last year’s $408 million in equity placements

Year-End Highlights:

● Kay Places $610 Million of Equity Investments in 2021

● Kay Grows Its Fully Integrated Real Estate Team and Robust Online Real Estate Investment Platform

(Torrance, CA) Torrance, CA-based Kay Properties, which operates one of the nation’s largest 1031 exchange property and real estate investment marketplaces, announced today it had posted another record year after successfully placing $610 million in equity for accredited investors participating in 1031 exchanges and direct cash investments.

Founded by CEO Dwight Kay, Kay Properties & Investments is considered one of the most experienced and knowledgeable investment firms in the country specializing in Delaware Statutory Trust (DST) and private equity real estate investments. The firm was established in 2010 with the emphasis on providing real estate investment options to high-net-worth clients looking for passive real estate ownership. In addition, Kay Properties believes it has created one of the largest 1031 exchange and real estate investment online marketplaces in the country that generates some of the largest DST 1031 investment volume in the United States. In 2021, for example, Kay Properties clients participated in thousands of transactions, and the $610 million of equity invested through the Kay Properties platform was invested in more than $8 billion of real estate offerings totaling approximately 50 million square feet of multifamily, manufactured housing, single tenant net lease, industrial, self-storage and medical properties nationwide.

Unparalleled Online 1031 Exchange Real Estate Marketplace Platform

“The kpi1031.com online marketplace has truly become a best-in-class robust platform connecting high-net-worth investors with quality real estate offerings as well as a place for real estate sponsors and operators to connect with tens of thousands of high-net-worth investors seeking to deploy capital into real estate offerings. We think the platform creates a perfect match for all sides of the 1031 exchange and real estate investment equation. This success over the years comes from hard work and dedication to our clients and team members as well as ultimately, beyond anything else, from the Lord,” said Dwight Kay, Founder & CEO of Kay Properties & Investments.

Kay explained that most investments made on the Kay Properties platform are for DST 1031 exchange replacement properties followed by a growing number of cash investments into real estate funds and other vehicles. DST investments are an allowable option for replacement properties for investors who have recently sold other real estate assets and are seeking to defer taxation on their gains, enter a passive management structure, and potentially broaden their geographic and real estate asset diversification* by reinvesting the proceeds in qualifying properties. So-called “like-kind exchanges” are allowable under U.S. Internal Revenue Code Section 1031 and DST investments have grown in popularity among accredited investors over the past decade.

“While it is true that a large amount of people investing through the kpi1031.com marketplace are seeking like-kind exchange properties, it is also true that the platform attracts many high-net-worth investors who are interested in participating in the offerings on the company’s marketplace with direct cash investments, a trend that we are seeing growing tremendously,” stated Kay.

Remarkable Year for Delaware Statutory Trust 1031 Exchange Investors

According to Kay, 2021 was a remarkable year for both Kay Properties and the entire 1031 exchange property market, including DSTs.

“Investment properties have gone through significant changes over recent years, and in many cases, owners have been faced with challenges they have never seen before, including the COVID-19 pandemic. For property owners who were motivated to sell during 2021 and were facing capital gains, reinvesting the proceeds via a 1031 exchange into qualifying properties including DSTs allowed them to not only defer capital gains taxes but also become part of a diversification* strategy with the potential for appreciation and monthly income*,” explained Kay.

Client-Centric and Emphasis on Educating Investors

2021 also extended and reinforced the established success of the Kay Properties business model that emphasizes both client relations and DST education.

“When I started Kay Properties, I had a vision of creating a hyper-client-centric business model that emphasized the utilization of tax efficiencies afforded to investors through the 1031 exchange and real estate investments and potentially reduced risk for investors through a fully-integrated real estate investment platform. This platform includes a growing team of DST 1031 experts and back-end support specialists that provide Kay clients deal sourcing, due diligence, transaction coordination, investor relations, in-house accounting, legal, finance and asset analysis. We also support potential investors through exclusive educational programs that are presented in an effort to keep investors fully informed of opportunities and potential risks that they must be aware of. The model has worked out well, and the year-end results of 2021 proves this out,” said Dwight Kay, Founder and CEO.

The result has been that Kay Properties has assisted thousands of high-net-worth investors across the country successfully complete 1031 exchange and direct investments, into real estate opportunities via the Kay online real estate marketplace at kpi1031.com.

“We also would like to thank all of our loyal and many times repeat investors from over the years as well as the numerous DST sponsor companies and other real estate operators with whom we have worked closely. We will continue to work tirelessly on behalf of all of our thousands of investors, team members and industry sponsor partners to, God willing, continue this great path forward in 2022 and many years to follow,” said Kay.

Investors can view current offerings on the Kay Properties online marketplace at www.kpi1031.com.

*Diversification does not guarantee profits or protect against losses. Potential cash flow, potential returns and potential appreciation are not guaranteed.

The Kay Properties team operates one of the largest 1031 exchange marketplaces and has made an impact on the commercial real estate industry and the Delaware Statutory Trust 1031 exchange investment platform. As the number of DST transactions has grown, new investors look to DST expert advisory firms such as Kay Properties to help them navigate the marketplace. The Kay Properties team was founded in 2010 and includes Chay Lapin, president of Kay Properties & Investments; Jason Salmon, SVP and managing director of real estate analytics; Betty Friant, SVP; and VPs Matt McFarland, Orrin Barrow, Steve Haskell and Alex Madden. The team operates on a customer-centric philosophy that views each client as a unique entity with individual investment objectives and special challenges. The team focuses on educating clients on 1031 exchange dynamics over months and sometimes years to help them achieve their specific goals. Since its founding in 2010, Kay Properties has created a business model that provides clients access to the marketplace of DSTs from more than 25 sponsor companies, full due diligence and vetting process for each DST property they represent; the industry’s first secondary market for those wishing to sell their DST interests prior to the property going full-cycle, and the industry’s largest selection of debt-free DSTs and leveraged DSTs for 1031 debt replacement. As a result, Kay Properties clients participated in thousands of transactions, and the $610 million of equity invested through the Kay Properties platform was invested in more than $8 billion of real estate offerings totalling approximately 50 million square of multifamily, manufactured housing, single tenant net lease, industrial, self-storage, and medical properties nationwide.

**NOTE: Past performance does not guarantee future results and DST investments may result in a complete loss of investor principal. This is an example of the experience of one of our clients and may not be representative of the experience of other clients. These clients were not compensated for their testimonials. Please speak with your attorney and CPA before considering an investment

There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential distributions, potential returns and potential appreciation are not guaranteed. For an investor to qualify for any type of investment, there are both financial requirements and suitability requirements that must match specific objectives, goals, and risk tolerances.

LOS ANGELES, Nov. 15, 2021 (GLOBE NEWSWIRE) -- Kay Properties & Investments recently helped a sophisticated high-net-worth investor strategically identify viable Qualified Opportunity Zone (QOZ) projects to help him achieve greater diversification from a heavy stock market concentration and take advantage of the unique tax benefits associated with the law outlined by the 115th Congress in Public Law No: 115-97 on December 22, 2017.

According to Betty Friant, Senior Vice President with Kay Properties & Investments, expert tax advantaged real estate advisor and highly experienced QOZ investment advisor, the client knew a little about QOZs, but relied on Kay Properties & Investments and their own CPA and attorney to help create a complete business plan that included both short-and long-term objectives.

"This particular investor did really well in the stock market but wanted to add diversification to his overall portfolio. Kay Properties helped him identify different Qualified Opportunity Zone projects that contained multiple properties distributed across many different geographic regions, multiple asset types, and with a diverse tenant mix," said Friant.

According to the Internal Revenue Service, Qualified Opportunity Zones were created by the United States Congress as part of the Tax Cuts and Jobs Act of 2017. The purpose of the program was to encourage long-term investments in low-income communities across the United States. The United States Department of Treasury estimates there are more than 8,700 QOZs in the country, including in territories like Puerto Rico. If the investor invests gains from a previous investment before December 31, 2021, and then holds their interest in the QOZ fund for at least five years, the tax they owe in December 2026 may be reduced by approximately 10% by virtue of the stepped-up basis. Furthermore, if the investor holds the investment for 10 years, there is potentially no tax on any appreciation on reinvested gains that they made. 

"So obviously, one of the keys to this investment strategy for this investor was to make sure the QOZ investment was initiated before December 31, 2021, after which he would not be able to receive a 10% step-up basis on his original investment," said Friant. 

According to Friant, Qualified Opportunity Zones may be able to provide investors a unique way to reduce taxes while doing something good for those who are less fortunate. By simply rolling profits over from the selling of a business, stocks, bonds, cryptocurrency, jewelry, art or real estate into a Qualified Opportunity Zone, investors can reap an array of tax benefits — assuming they make the investment within six months of realizing their capital gain.

"But the thing about QOZs is that their designation is based on data from the 2010 census, and QOZ's didn't become law until 2017. So here we are in 2021 and some of these previously identified opportunity zones are now on the edge of some of the hottest real estate in the United States," said Friant. 

1031 exchange investor couple turns to Kay Properties to help eliminate active management responsibilities and to achieve potential recurring monthly income

(Torrance, CA) Kay Properties & Investments was recently contacted by a real estate investor couple who needed help completing a 1031 exchange into Delaware Statutory Trust (DST) investments across multiple property types and geographic locations. While the couple were experienced investors with decades of real estate experience, they contacted Kay Properties in order to access the firm’s full DST marketplace of all-cash/debt-free real estate investment options, and the firm’s nationally recognized expertise in DST investments.

“This was more than a successful DST 1031 exchange transaction. It represented a growing trend we’ve been seeing more and more within our investment community. There is a real need for our investors to have solutions for their investment real estate needs once the time comes for them to step away from active management. I was incredibly proud that our Kay Properties team of DST experts was able to help these two impressive and experienced investors achieve their objectives,” said Dwight Kay, Founder and CEO of Kay Properties and Investments.

According to Kay Properties Vice President and DST 1031 investment expert, Alex Madden, when the couple reached out to Kay Properties, they were in a conundrum, and needed a firm who could help advise them on Delaware Statutory Trusts 1031 exchanges. They were looking for someone with the patience and resources to educate them on specific strategies while always enlightening them on both the potential risks and benefits of DST investments.

“They had worked hard their entire lives and had acquired a portfolio of eight well-located condominiums that had appreciated phenomenally over the years. It was a big point of pride for them that they were able to pay off the mortgages on all their properties,” said Madden.

Because the couple were first-time DST investors, Madden explained that he spent a significant amount of time in the beginning educating them on how to use DST investments as a 1031 exchange vehicle, and how the unique structure of the DST could potentially help them achieve their unique set of financial and nonfinancial goals. We also spent considerable time and energy discussing the potential risks of DST investments and going through these risk factors in detail.

“They had been active and hands-on real estate investors for so long, so we understood there was going to be a learning curve. But they regularly attended and participated in our conference calls and our webinars, along with reading just about everything we had including the detailed offering memorandums business plans and risk factors, so that when they consulted with their CPA, they were prepared and had all of the right questions to ask. The main thing they wanted was to be completely hands off from active management as well as to defer associated taxes utilizing the 1031 exchange,” said Madden.

Madden explained that while they had considered some triple net lease (NNN) properties at first, they also felt it was too late in their life to learn a whole new business model. They also felt that after making all the sacrifices over the years to become debt-free on their condominiums, it didn’t make sense to take the risk of investing in a leveraged DST. Kay Properties has access to many leveraged DSTs for those needing to replace debt in a 1031 exchange as well as many debt-free DSTs for those not needing to replace debt nor wanting to take on the risk of leverage in their replacement properties.

So, with the help of Kay Properties team of DST experts, the couple invested in a multifamily apartment DST, a corporate headquarters DST, a dialysis medical building DST, and a self-storage DST. Each property was in a different geographical location, and each tenant represented a different industry.

“Everything went well, and in the end, they were very pleased and appreciative of the Kay Properties business model. We spent the necessary time with them to understand their objectives, goals and risk tolerances and worked tirelessly with them and their CPA to build a 1031 exchange DST solution that would potentially achieve those objectives,” said Madden.

As we emerge, fortunately, from the pandemic, including the recent Delta variant surge, it’s a good time to assess real estate investment opportunities if you’re looking to reinvest proceeds in a 1031 exchange transaction or seeking to invest cash as part of a diversified financial portfolio strategy.

Here’s how you could build a post-pandemic real estate investment portfolio, recognizing some of the new realities the pandemic has exposed.

Let’s say you, your family or your family office is looking to invest $1 million to $100 million, plus or minus. A prudent diversification strategy suggests you should allocate capital across different property types, asset classes and geographies. (Of course, diversification does not guarantee profits or protect against losses, past performance never guarantees future results, and income and appreciation are never assured with any investments, but real estate has proven to be a winning part of many investors’ alternative asset portfolios.)

Diversifying across property types and locations

A diversified investment approach right now could include a mix of industrial, multifamily and retail properties.

The pandemic has been particularly kind to industrial properties, namely those occupied by logistics and shipping companies, and properties that serve as distribution hubs for manufacturers, wholesalers and retailers. These assets, as a class, have performed especially well the past two years as the trend toward e-commerce accelerated drastically during the pandemic—a period in which many people who previously had resisted home delivery of goods and services finally embraced the concept that was already growing year-over-year.

Increased demand for delivery is expected to continue to have positive long-term implications for industrial real estate, including last-mile distribution and logistics, for years to come. So industrial/distribution and logistics properties should be seriously considered as part of a real estate investment portfolio whether considering a 1031 exchange or as a direct investment.

Multifamily properties have also performed relatively well during the pandemic, thanks to help for tenants in the form of direct aid and rental payment assistance, as well as forbearance from landlords. Already, the multifamily market is experiencing higher rents as the pandemic recedes and the return to work continues, according to Yardi Matrix, and as units turn over and rents reset at new levels.

Retail properties have been a mixed bag during the pandemic, with enclosed malls performing the worst, shopping centers with big-box tenants somewhere in the middle, and grocery-anchored neighborhood shopping centers faring the best. Net-leased assets, where the tenants pay some or all of the property expenses including taxes and insurance in addition to rent, generally have outperformed the market as a whole. Net-leased assets include freestanding drugstores, health services operations such as dialysis centers, and fast-food restaurants with drive-throughs. These types of assets should be seriously considered for inclusion in a diverse real estate investment portfolio when seeking 1031 exchange investments and direct cash investments into real estate.

Using DSTs as a vehicle to hold diverse investments

An effective way to hold post-pandemic real estate investments could be Delaware Statutory Trusts. DSTs are a vehicle for direct investment or for a turnkey solution as part of a 1031 exchange. Investors are often deploying as little as $25,000 into DSTs and as much as $50,000,000-plus, so they can work for a wide range of accredited investors (typically defined as having a net worth of over $1,000,000).

With DSTs, investors can own an interest in diverse real estate assets without the hassles and headaches of sole ownership and management, which entails the burdens of being a landlord, i.e., tenants, toilets and trash.

DSTs can hold title to all manner of investment real estate. The investment sponsor is responsible for day-to-day asset management, with investors participating passively in the form of potential monthly distributions (positive cash flow) by direct deposit into their checking or savings accounts. There also is the potential to generate appreciation just like with sole ownership, although it is important to note that as with all real estate investments, positive cash flow and appreciation are never guaranteed and could be lower than anticipated.

There are also the other tax advantages of direct real estate investment, including depreciation deductions, to help shelter rental income. Plus, DSTs are 1031-exchange eligible, unlike many other real estate investment structures, which means that any capital gains on the sale of assets can be deferred if the proceeds are reinvested into other income or investment properties.

You could build a diverse portfolio of real estate investments across property types and geographies by investing in multiple DSTs. Using the $1 million hypothetical investment amount noted above, a portfolio could include:

• Five $100,000 investments in different multifamily apartment properties in various Sunbelt states;
• One $150,000 investment and one $100,000 in different net-leased medical facilities in Texas;
• One $250,000 investment in an industrial/distribution facility in the Midwest.

The bottom line

For all the challenges presented by the pandemic, the crisis is illuminating potential investment opportunities that could have stronger prospects long term. Certainly, the pandemic has demonstrated the resilience of investment real estate as an asset class, with lessons for building a real estate portfolio that can possibly endure market shifts and swings.

Because real estate is so integral to the ways we live, work and play, income and investment properties are likely to remain attractive for many investors interested in diversification and the pursuit of income and appreciation well into the future. The issue, as always, is identifying the opportunities that are best suited to meet your personal financial and tax goals and objectives.

Dwight Kay is founder and CEO of Kay Properties and Investments, LLC, which operates a DST and 1031 exchange property investment marketplace online.

 

LOS ANGELES, Nov. 03, 2021 (GLOBE NEWSWIRE) -- Kay Properties & Investments recently announced the successful completion of a complicated Delaware Statutory Trust (DST) 1031 exchange for $23 million across multiple asset classes and geographic locations. The transaction involved helping two partners identify viable exchange properties prior to them selling a building that was the center of the business operation. The partnership relied heavily on Kay Properties’ unique fully-integrated DST real estate investment platform that provides clients information on the potential benefits and risks of DST 1031 investments, guidance in navigating the nuances and deadlines of DST 1031 exchanges, and a broad DST property menu.

“This was a very unique situation in that the two partners wanted to relinquish the industrial building where their business operated, and transition into a passive real estate ownership position while keeping the partnership intact. Our role was strictly limited to advising them on their DST 1031 business plan, and assisting them in identifying viable 1031 exchange options,” said Chay Lapin, President of Kay Properties & Investments, and recognized expert in DST 1031 exchanges.

DST stands for Delaware Statutory Trust, which is an entity created to hold title to one or more income-producing commercial properties including apartments, medical buildings, net-lease retail, industrial facilities and more. Individual investors in a DST hold an investment position in single or multiple properties. Each investor owns a beneficial interest in the trust that owns the underlying real estate. The DST structure allows investors to defer capital gains taxes via a 1031 exchange, qualifying as “like-kind” property under IRC Revenue Ruling 2004-86. DST properties also provide access to institutional quality real estate assets, with a passive ownership position that entitles the investor to his or her pro-rata share of potential income and appreciation in the assets of the DSTs.

According to Orrin Barrow, Vice President with Kay Properties who was also instrumental in advising and facilitating the 1031 exchange, the key to making this transaction work was Kay Properties’ ability to leverage its deep industry contacts to identify custom DSTs only available to Kay clients that fit the investors’ unique needs and overall investment strategy.

“This deal highlights something Kay Properties does really well, and that is utilizing our relationships in the real estate industry to find custom opportunities that are only available through the Kay Properties platform, and then successfully securing the equity reservation. We were able to help them close on a quarter of their actual exchange shortly after their identification period so they had a leg up in securing exactly the type of exchange property they wanted. I don’t think there is another representative firm out there that has that type of leverage and that type of access to both open market options and custom DSTs,” said Barrow.

In addition, the Kay Properties team worked closely with the partners to educate them on the nuances and timelines associated with DST 1031 exchanges, along with the potential risks of the DST 1031 structure.

“Kay Properties is a truly specialized firm that deals with nothing but DST 1031 investment and real estate strategies. We have participated in more than $21 billion of DST investments, and thus have the experience needed to properly guide investors during this important life decision of a large 1031 exchange into DST investments. The two partners knew a little about DSTs, but they certainly did not have enough knowledge to facilitate it themselves and navigate the market alone. They were really appreciative of all the time we took to carefully explain the entire DST process and associated risks, and helped them navigate the entire process from start to finish,” said Dwight Kay, Founder and CEO of Kay Properties & Investments.

The result was the partners were able to transition into a passive ownership position, gain diversification across multiple geographic regions and asset types, and recognize the potential for a regular monthly cash flow.

“It was one of the most unique deals I have ever been involved with and our ability to provide access to all-cash/debt-free DSTs and leveraged DST properties was instrumental in accomplishing everything these investors wanted to accomplish,” commented Barrow.

High-net-worth investor decides to relinquish a portion of his rental property portfolio in a succession of sales before entering multiple DST 1031 exchanges to help achieve diversification, non-active management and potential monthly income

LOS ANGELES, Oct. 26, 2021 (GLOBE NEWSWIRE) -- Kay Properties & Investments successfully helped a high-net-worth client complete 15 Delaware Statutory Trust (DST) investments following the sale of five multifamily properties within a short period of time.

“This particular client leveraged the full potential of Kay Properties’ unique real estate platform that combines extensive client education, a robust menu of diversified DST investment options from multiple Delaware Statutory Trust sponsor companies, and deep market contacts across the country. After conducting literally years of research on the subject, he decided that DST investments provide an investment strategy that fit his own goals and objectives better than active ownership/management of rental properties, as well as that Kay Properties was the right team and platform to help him invest in DST 1031 properties,” said Dwight Kay, Founder and CEO of Kay Properties.

Kay also explained that this type of transaction illustrates the growing popularity of DST 1031 exchanges among real estate investors.

“As DST 1031 exchange experts, Kay Properties & Investments representatives speak with hundreds of accredited investors each week who want to know more about DST investment opportunities,” said Kay.

After completing his first DST 1031 exchange several years ago, the client recognized the level of expertise Kay Properties provided throughout the entire exchange process, and how readily available the entire Kay Properties team was to answer questions or provide advice.

“He first started to learn about DST investments through extensive conversations with the Kay Properties team and with the resources available on the www.kpi1031.com platform. Then, he started to conduct his own research and really got comfortable with how DST 1031 exchanges work. Over the months he asked many questions, and we were always there for him with answers and guidance. Plus, he really got to the point several years ago where he didn’t want to be a landlord anymore. He was proud of himself for having built such a portfolio during his younger years, but he just reached a point in his life where he wanted to start selling some of his investment properties,” said Jason Salmon, Senior Vice President and Managing Director of Real Estate Analytics with Kay Properties & Investments.

Because the investor had already completed at least one DST 1031 exchange and was comfortable with the investment vehicle, Salmon explained he now wanted to slowly liquidate his real estate portfolio. The investor, along with his CPA and attorneys, worked closely with Salmon and the Kay Properties team of DST experts to create a very detailed plan that included anticipated closing times on the relinquished properties, timelines for finding and vetting replacement properties that fit within the investor's very specific parameters, and creating a workflow that coordinated all the necessary paperwork and signatures so that everything was organized and every closing went smoothly.

“Some sales overlapped with each other, and so it became a cadence -- one after the other, after the other, after the other, after the other. We are in constant contact and we really immerse ourselves into finding just the right DST property or properties that fit perfectly into his 1031 investment model,” said Salmon.

The investor, Salmon explained, invested in industrial distribution, net lease, self-storage, medical, and multifamily DST investments that were for sale across multiple geographic regions.

“The gentleman is very, very comfortable with DSTs at this point, and is very pleased with the diversification, passive ownership, and potential monthly income stream that he has been able to accomplish. I believe his intention is to not buy any more rental real estate, and continue to move into DST investments on a systematic basis,” said Salmon.

Local real estate broker liaisons with Kay Properties to capitalize on the firm’s reputation as specialist in DST 1031 exchanges, and its dedication to provide concierge-level service and education on behalf of real estate investors to create a customized 1031 exchange strategy

LOS ANGELES, Sept. 23, 2021 (GLOBE NEWSWIRE) -- Kay Properties & Investments recently announced another successful completion of an all-cash/debt-free Delaware Statutory Trust 1031 exchange. The transaction highlighted the perfect coordination between real estate brokerage representation, enlightened clients and a DST 1031 expert advisory firm to orchestrate the successful 1031 exchange of a vacant lot into a $2-million diversified portfolio.

“Kay Properties & Investments is very special to the 1031 exchange market because we do nothing but work in the DST space day in and day out. For many years, investors like these have chosen Kay Properties for our vast selection of DST opportunities, vigorous DST due diligence process, extensive expertise in real estate, and relentless dedication to customer service,” said Dwight Kay, Founder and CEO of Kay Properties & Investments.

According to Chay Lapin, DST 1031 expert and Kay Properties President who supervised the exchange process, the transaction first entailed extensive education for both the real estate broker and the investor client. This included reviewing potential DST properties that would possibly be a good fit for the investor’s long-term plans, lengthy discussions about the potential benefits and risk factors of investing in real estate and DST investments, and then creating a detailed business plan that ensured the multiple 1031 exchanges would be met within the allotted time frame, along with zero debt (aka debt-free Delaware Statutory Trust investments) with a passive management structure, and targeted monthly cash flow to the investor.

“What made this DST 1031 exchange so special was that it was originally brought to us through the real estate broker. She not only understood that there would be some significant tax consequences following the sale of this unique parcel of land but also understood she wasn’t experienced enough to accurately guide her client through the nuances and rules associated with DSTs. She was, however, taking care of her client’s best interest, and incredibly insightful to recognize that a DST investment would be a perfect fit for her client’s needs even though she knew that since she was not a licensed securities representative, she would not be able to receive compensation for the referral,” said Lapin.

After coordinating with the real estate broker and client on the sale of the land parcel, the Kay Properties team of Delaware Statutory Trust 1031 experts worked closely with the client’s entire family to identify and ultimately invest in five different debt-free DST offerings. As a result, the client was able to defer all the accumulated capital gains and depreciation recapture taxes upon sale of the land and invest the entirety of the tax-deferred capital into Delaware Statutory Trust offerings. By utilizing the Kay Properties 1031 DST marketplace at www.kpi1031.com, the client was grateful to be able to diversify into passive DST investments with the potential for monthly cash flow.

As a result, the client was able to diversify across multiple asset classes, including medical, commercial and industrial, while also spreading their investment across multiple geographic regions.

Matt McFarland, Vice President and DST 1031 specialist with Kay Properties, emphasized that one of the most valuable attributes Kay Properties brought to this client, like all their clients, was valuable information in the form of detailed education on the nuances of the DST investment marketplace.

"Through the education and explanation of the investment process, we encouraged the active engagement of all family members, as the decision to invest in DSTs is really a collaborative group effort for not only the investor but also their family members and their heirs. Family members are able to bounce ideas off each other and ask questions that the individual may not think to ask. When all the exchanges were completed, the client reached out to me to inform me how grateful he and his family were to get to work with the Kay Properties team and our significant menu of debt-free DST properties in addition to our access to the marketplace of DSTs both with debt and without,” said McFarland.

LOS ANGELES, July 08, 2021 (GLOBE NEWSWIRE) -- Kay Properties is proud to highlight the help they have provided their clients unloading and diversifying their $10 million real estate portfolio over multiple years. The clients, a husband-and-wife team, spent many years self-managing and growing a portfolio of multiple multifamily properties. After learning more about the 1031 exchange capabilities and the Delaware Statutory Trust structure, the clients decided to gradually transition away from active management. They started by selling just one apartment property and, over many years, have sold most of the remaining properties in their portfolio. Through the years they have continued to work with Kay Properties and have utilized the Kay Properties 1031 DST marketplace at www.kpi1031.com.

The Delaware Statutory Trust exchange investments were completed by Kay Properties and Investments team members Chay Lapin, President, and Matt McFarland, Vice President.

Chay Lapin, President, stated, "We are grateful for the long-term relationship we have built with our clients based on years of personalized service to them. Through years and years working with these clients, we have been able to earn their trust and business the same as we have for thousands of other Delaware Statutory Trust investors throughout the United States."

"These particular clients have participated in the Kay Properties DST marketplace over many years and have been able to create a well-diversified portfolio of 20+ DST investments, spanning across many markets and property types. These clients had very little debt on their multifamily properties and were able to remain in a low-leverage situation with their ownership in many Delaware Statutory Trust properties."

Kay Properties offers clients access to the largest selection of debt-free DSTs. Many of these investments are made available exclusively to clients of Kay Properties. The 1031 DST marketplace at www.kpi1031.com also provides an inventory of 20-40 DST offerings from over 25 different sponsor companies, and many of these offerings are leveraged for those needing debt replacement in their 1031 exchange.

Matt McFarland, Vice President at Kay Properties, stated, "It brings us great pride to have the opportunity to work with and develop lasting relationships with so many clients over numerous years. Many of our clients continue to invest in DSTs as they sell their other investment properties and/or continue to exchange with us when their DST investments sell and go full-cycle due to the personalized service that the Kay team has demonstrated year after year. These long-term clients are strong evidence of the fact that DSTs can be a great solution for so many accredited investors who are looking for passive, tax-deferred real estate investments."

Washington-watchers including many of us in the real estate industry are waiting to see if and how federal policymakers change the tax treatment of capital gains and 1031 like-kind exchanges this year.

The capital gains tax rate affects the flow of capital into every investment class, including but not just real estate. Operating companies and operators of hard assets including real estate count on capital and liquidity to be productive. I’m hopeful the current capital gains tax rate will be maintained versus raised as has been proposed.

Meantime, while no one is suggesting that 1031 exchanges of investment property be eliminated, the Biden Administration’s proposed budget for the coming fiscal year would significantly curtail them by limiting the amount of capital gains from investment property sales that could be deferred to $500,000 per year for individuals and $1 million per year for married couples.

1031 exchanges allow property investors to defer capital gains and other tax on investment gains when they reinvest the proceeds into other like-kind properties, which means they must be held for investment or business purposes (meaning you cannot 1031-exchange into a home that you will utilize as your primary residence). Today there is no limit on the amount of capital gains from the sale of investment real estate that can be deferred using 1031 exchanges.

In the face of the tax policy uncertainty, the question is how to think about current real estate investments and future investment plans. First and foremost, the times call for calm. The fact is, real estate has been an attractive alternative investment class and it may continue to be—there are virtually always appealing investment opportunities, be they short or long term. Second, with regard to any change in the capital gains tax rate, it would likely affect all asset classes—not just real estate—so any impact likely would be proportionate, or relatively so.

If you’re holding investment property, should you sell? That’s a question on the minds of many now.

It depends. If you think you’ve realized the full upside potential of the investment and you need the proceeds, it may make sense for you to sell, depending on your personal financial goals and your liquidity.

In contrast, if you’re waiting on an important milestone in your investment’s life, such as some significant improvements to be made, rent increases to be fully realized, or the signing of a major tenant, it may make sense to hold the investment longer. Everyone’s situation is different … there is no single right answer. You’ll have to weigh the fundamentals, including the potential for further appreciation and cash flow from the real estate, versus any immediate change in the tax consequences. Consult your tax and legal advisor, to be sure.

How to invest in real estate given possible limits on 1031 exchanges?

The flipside question of “Do I sell now?” is “How to invest in real estate?” in the current environment.

If the use of 1031 exchanges becomes limited, one real estate ownership structure likely to be even more attractive is the Delaware Statutory Trust (DST). DSTs are a form of fractional ownership that can be a great way to make passive investments in real estate and achieve diversification across multiple assets.

DSTs also happen to be 1031-exchange eligible. In other words, you can sell another investment property and reinvest the proceeds into one or more DSTs in order to defer capital gains tax on the prior gain, and you can sell DST investments and exchange into other investment properties, with capital gains tax deferred, in the future.

DST interests can be divided to be relatively modest investment amounts, so corresponding future gains, if there are gains, would likely be below any thresholds that may be set to qualify for 1031 treatment under the tax code. Similarly, each individual property held in a DST may be sold at different points in time over a number of years, so if an investor diversifies their exchange dollars into small enough allocations, gains in any one year would potentially not exceed whatever limit may be imposed in order to qualify for 1031 treatment.

Many individuals, married couples and family offices invest in real estate DSTs already. Others are looking at the investment type now for the first time as a potential haven in a tax-policy storm. Here’s an example of how a DST investment could work as part of a 1031 tax-deferral strategy right now:

Lisa has a $5,000,000 apartment property that she decides to sell in 2021. There is a $2,000,000 gain on the sale.

She invests the $5,000,000 in 10 different DST investments in $500,000 increments, thus deferring capital gains tax on the original gain. The investments also set her up to potentially defer taxes on future gains, since gains from DSTs are 1031-exchange eligible.

In making the new DST investments, she diversifies her portfolio across different property types and geographies. She also inquires about the holding periods for each of the investments, determining there’s a reasonable likelihood they will be liquidated, with potential gains realized, in different tax years. So she will be in the potential position—in the future—of remaining below any new federal tax cap on the amount of gain that can be deferred in any one year through 1031 exchanges.

There’s no such thing as a crystal ball, so no way to know what Congress will or won’t do this year on tax policy. It’s left to us, including investment property owners and investors, to stay calm and make the best decisions today given what we know now. That applies to the timing of investment property sales, and decisions about how to invest proceeds or cash in commercial and multifamily real estate going forward. Personally, I’m no less excited about real estate investing today than I was last year, and just as excited as I expect to be next year. The appeal of real estate as an investment class is likely to remain. The challenge, as always, is to make the most of opportunities.

Chay Lapin is president of Kay Properties and Investments, LLC, which operates a 1031 exchange property and real estate investment marketplace online at kpi1031.com.

Washington-watchers including many of us in the real estate industry are waiting to see if and how federal policymakers change the tax treatment of capital gains and 1031 like-kind exchanges this year.

The capital gains tax rate affects the flow of capital into every investment class, including but not just real estate. Operating companies and operators of hard assets including real estate count on capital and liquidity to be productive. I’m hopeful the current capital gains tax rate will be maintained versus raised as has been proposed.

Meantime, while no one is suggesting that 1031 exchanges of investment property be eliminated, the Biden Administration’s proposed budget for the coming fiscal year would significantly curtail them by limiting the amount of capital gains from investment property sales that could be deferred to $500,000 per year for individuals and $1 million per year for married couples.

1031 exchanges allow property investors to defer capital gains and other tax on investment gains when they reinvest the proceeds into other like-kind properties, which means they must be held for investment or business purposes (meaning you cannot 1031-exchange into a home that you will utilize as your primary residence). Today there is no limit on the amount of capital gains from the sale of investment real estate that can be deferred using 1031 exchanges.

Should you sell investment property now?

In the face of the tax policy uncertainty, the question is how to think about current real estate investments and future investment plans. First and foremost, the times call for calm. The fact is, real estate has been an attractive alternative investment class and it may continue to be—there are virtually always appealing investment opportunities, be they short or long term. Second, with regard to any change in the capital gains tax rate, it would likely affect all asset classes—not just real estate—so any impact likely would be proportionate, or relatively so.

If you’re holding investment property, should you sell? That’s a question on the minds of many now.

It depends. If you think you’ve realized the full upside potential of the investment and you need the proceeds, it may make sense for you to sell, depending on your personal financial goals and your liquidity.

In contrast, if you’re waiting on an important milestone in your investment’s life, such as some significant improvements to be made, rent increases to be fully realized, or the signing of a major tenant, it may make sense to hold the investment longer. Everyone’s situation is different … there is no single right answer. You’ll have to weigh the fundamentals, including the potential for further appreciation and cash flow from the real estate, versus any immediate change in the tax consequences. Consult your tax and legal advisor, to be sure.

How to invest in real estate given possible limits on 1031 exchanges?

The flipside question of “Do I sell now?” is “How to invest in real estate?” in the current environment.

If the use of 1031 exchanges becomes limited, one real estate ownership structure likely to be even more attractive is the Delaware Statutory Trust (DST). DSTs are a form of fractional ownership that can be a great way to make passive investments in real estate and achieve diversification across multiple assets.

DSTs also happen to be 1031-exchange eligible. In other words, you can sell another investment property and reinvest the proceeds into one or more DSTs in order to defer capital gains tax on the prior gain, and you can sell DST investments and exchange into other investment properties, with capital gains tax deferred, in the future.

DST interests can be divided to be relatively modest investment amounts, so corresponding future gains, if there are gains, would likely be below any thresholds that may be set to qualify for 1031 treatment under the tax code. Similarly, each individual property held in a DST may be sold at different points in time over a number of years, so if an investor diversifies their exchange dollars into small enough allocations, gains in any one year would potentially not exceed whatever limit may be imposed in order to qualify for 1031 treatment.

Many individuals, married couples and family offices invest in real estate DSTs already. Others are looking at the investment type now for the first time as a potential haven in a tax-policy storm. Here’s an example of how a DST investment could work as part of a 1031 tax-deferral strategy right now:

Lisa has a $5,000,000 apartment property that she decides to sell in 2021. There is a $2,000,000 gain on the sale.

She invests the $5,000,000 in 10 different DST investments in $500,000 increments, thus deferring capital gains tax on the original gain. The investments also set her up to potentially defer taxes on future gains, since gains from DSTs are 1031-exchange eligible.

In making the new DST investments, she diversifies her portfolio across different property types and geographies. She also inquires about the holding periods for each of the investments, determining there’s a reasonable likelihood they will be liquidated, with potential gains realized, in different tax years. So she will be in the potential position—in the future—of remaining below any new federal tax cap on the amount of gain that can be deferred in any one year through 1031 exchanges.

There’s no such thing as a crystal ball, so no way to know what Congress will or won’t do this year on tax policy. It’s left to us, including investment property owners and investors, to stay calm and make the best decisions today given what we know now. That applies to the timing of investment property sales, and decisions about how to invest proceeds or cash in commercial and multifamily real estate going forward. Personally, I’m no less excited about real estate investing today than I was last year, and just as excited as I expect to be next year. The appeal of real estate as an investment class is likely to remain. The challenge, as always, is to make the most of opportunities.

LOS ANGELES, July 02, 2021 (GLOBE NEWSWIRE) -- Kay Properties is pleased to announce the completion of a three-phased 1031 exchange project resulting in an investment into over $130 million of Delaware Statutory Trust (DST) properties.

Over the course of multiple months, Kay Properties President Chay Lapin and Vice President Steve Haskell helped a family-owned real estate firm navigate three complex 1031 exchanges into a highly diversified portfolio of DST properties.

In the summer of 2020, the family-owned real estate firm began liquidating their portfolio of six large multifamily properties. The Kay Properties team worked closely with the client’s legal counsel, real estate brokers, qualified intermediary and many Delaware Statutory Trust sponsor companies to execute a smooth and swift series of transactions.

“This 1031 exchange into Delaware Statutory Trust properties was highly nuanced in its own right,” said Steve Haskell. “There were multiple DST properties, several different legal entities, and a lot of moving parts. On top of it all, the COVID pandemic added an additional level of complexity. We are grateful for the strong relationships we enjoy with the DST sponsor companies as well as are pleased to have provided such highly personalized service to these very large and sophisticated real estate clients.”

The clients ultimately invested in over 44 Delaware Statutory Trust offerings comprised of 57 individual properties in over 15 states. Almost all the client’s real estate wealth was initially concentrated in a single asset type in one real estate market. The investor sought out the Kay Properties team for their vast network and extensive experience in the 1031 exchange and DST industry.

Kay Properties President Chay Lapin stated, “I am especially pleased with our ability to help our clients close on such a large amount of Delaware Statutory Trust real estate investments in just three business days after closing on their relinquished property. This saved our client hundreds of thousands of dollars in missed rental income opportunity.”

“I highly believe that only with the extraordinary focus and sophistication that the Kay Properties team brings to the table could such a complex transaction be completed with such distinctively attentive and personal service,” Lapin added. “Personalized service is one of the many reasons that thousands of 1031 exchange investors nationwide have opted to purchase Delaware Statutory Trust investments through Kay Properties and the www.kpi1031.com marketplace.”

I’ve been a professional real estate investor since prior to the Great Financial Crisis and have seen pretty much everything: Markets that go up and down, trends that fade away versus take hold and stay and, certainly, changes in political leadership that produce new tax policies.

Now we have President Biden in the White House and are seeing his proclamations and policy positions. Let’s look objectively at indications from the administration and what could happen this year with potential implications for investment real estate.

First things first, the economy at the moment is on fire. U.S. GDP may top 6% this year, according to The Conference Board. To be sure, the recovery is uneven and Covid remains a serious factor on a global basis. But I note the macroeconomy because at my firm, we believe there’s no better indicator of potential demand for investment real estate. When the economy is expanding, demand increases, generally speaking, for income properties occupied by business users and multifamily properties that provide rental housing to people.

Watch for Changes to Capital Gains Taxes and 1031 Exchanges

In terms of tax policy, now on the table from the Biden administration are some proposals with the potential to affect investment in real estate: an increase in the capital gains tax rate and limits on the use of 1031 like-kind exchanges. (Basically, 1031 exchanges allow property investors to defer capital gains and other tax on investment gains when they reinvest the proceeds in other investment properties.) Biden has proposed raising the capital gains tax rate to 39.6% for people making more than $1 million a year.

My hope — one that is shared by many others — is that the capital gains tax rate is not increased. I believe a favorable capital gains tax rate encourages just that — capital investment. But let’s say the rate goes up: How would that affect real estate investments? Generally speaking, it would potentially reduce returns, but it would also reduce returns on all manner of investments, including on the sale of stocks, bonds and other assets. So any hit to your investment real estate portfolio wouldn’t be pretty but could be proportionate.

In that environment, the reasons for a diversified portfolio of stocks, bonds and alternative investments that include real estate would be the same as they are now: to try to reduce risk by holding a mix of assets, including hard assets, that are not all correlated with the stock market. Investment real estate, as a reminder, doesn’t rise and fall, as a class, with the stock market. And there is the potential to generate income (positive cash flow) in addition to potential appreciation. There also are other tax advantages of real estate investment, including depreciation deductions to help shelter income.

Should You Sell Investment Real Estate Now?

In the short term, some property investors may be wondering: “Should I sell now to get ahead of any change in the capital gains tax rate?” The simple answer is maybe. There is no one-size-fits-all answer for everyone. It depends on your individual situation and the property you’re holding. If its value has held up well during the pandemic and you need to sell, it may make sense. If the value has declined but is poised for a rebound and you don’t need the proceeds now, it may make sense to wait. Of course, consult your tax or legal adviser as you consider the options, because everyone’s individual situation is different.

Biden also has proposed curtailing the use of 1031 like-kind exchanges. To be clear, he has not proposed eliminating them, but limiting their use. In the administration’s budget released in late May, there is a proposal to limit the amount of capital gains from investment property sales that can be deferred to $500,000 per year for individuals and $1 million per year for married couples. (Today there is no limit on the amount of capital gains from the sale of investment real estate that can be sheltered using 1031 exchanges.)

You’re planning ahead for retirement, and determined to invest in a diversified basket of stocks, bonds and alternative investments. Maybe you have no exposure to income properties now, or maybe you’re a landlord either as your primary business or as a part-time investor. If it’s the latter, you’re likely ready to shed the responsibilities in favor of a passive approach that allows you to try to stress less and enjoy more.

Either way, you can be invested in commercial and multifamily real estate in retirement without the daily hassles of being a landlord. There are a range of passive real estate investments with the potential to help you achieve your goals, dreams and objectives. Here’s a look at four of them.

Real Estate Investment Trusts (REITs)

The market for publicly traded REITs is long established, and many people access the market through their retirement plans and stock brokerage accounts. REITs are generally companies that own and operate real estate, so you’re investing in the company, not just the underlying real estate. REITs pay out their income in the form of dividends, which are taxable.

The biggest downside to REIT investments — aside from their high correlation to the overall stock market and the volatility that entails — is the inability to defer taxation on any capital gains from the sale of shares. In other words, when you sell your REIT shares, you will have to pay capital gains tax on any gains.

Delaware Statutory Trusts (DSTs)

With DSTs, which are a form of direct real estate ownership, you have the ability to defer capital gains tax on gains so long as the gains are reinvested in other investment properties. (The reinvestment occurs in the form of a 1031 exchange, which your tax or legal adviser can tell you more about.) That’s one reason but not the only reason to consider DSTs.

DSTs are entities that hold title to investments, such as income-producing real estate. Most types of real estate can be owned in a DST, including industrial, multifamily, self-storage, medical and retail properties. Often, the properties are institutional quality similar to those owned by an insurance company or pension fund, such as a 400-unit Class A multifamily apartment community or a 100,000-square-foot industrial distribution facility leased to a Fortune 500 logistics and shipping company. The asset manager (also known as the DST sponsor company) takes care of the property day to day and handles all investor reporting and monthly distributions.

DST investments are used by cash investors with a typical minimum of $25,000, as well as by investors seeking a replacement property as part of a tax-deferred 1031 exchange solution. To learn more about retirement planning with DSTs or how they can be used in a 1031 exchange, visit www.kpi1031.com.

Tenants-in-Common Properties (TICs)

A TIC structure is another way to passively invest in real estate as part of a retirement planning strategy. With a TIC, you own a fractional interest in the property and receive a pro rata portion of the potential income and appreciation of the real estate. As a TIC investor, you will typically be given the opportunity to vote on major issues at the property, such as whether to sign a new lease with a tenant, refinance the mortgage or sell the property.

Although TIC investments and DSTs have their nuances and differences, they often will hold title to the same types of property. DSTs are generally considered the more passive investment vehicle. Both DSTs and TICs qualify for 1031 exchange tax treatment as described above.

Qualified Opportunity Zone Funds

Qualified Opportunity Zone Funds, which were enabled by the Tax Cuts and Jobs Act of 2017, are a form of private equity funds. They offer some capital gains tax deferral and elimination benefits. A fund of this type can invest in real property or operating businesses within an Opportunity Zone, typically a geographic area in the U.S. that has been so designated by the government because it may be underserved or neglected.

If you seriously consider this investment option, be aware that there may be a higher level of risk based on the location of the property, and the time horizon of the fund may be as long as 10 years, which means tying up your capital for that length of time in an illiquid asset. With a Qualified Opportunity Zone Fund, there can be potential cash flow and appreciation, as well as positive economic and social impacts on a community.

Bottom line: Don’t forget about passive real estate investments in your retirement planning. Investment properties can provide diversification to a stock- or bond-heavy portfolio, with the potential for income in addition to appreciation and tax advantages, including the ability to defer capital gains taxes. (Diversification does not guarantee protection against losses or appreciation, although many believe it is a prudent strategy when investing.)

If you are or were a landlord, passive real estate investments also let you continue to be invested in the real estate market without the headache of dealing with tenants.

All investments carry risk, be they stocks, bonds or hard assets like real estate, but some investment strategies are less risky than others.

I’ve taken a generally conservative approach to real estate investing over a considerable career, and with much success. My approach has helped mitigate the risks of real estate ownership and investment while maximizing the potential to generate income (positive cash flow), shelter income from tax, and achieve asset-value appreciation. Here are four “secrets” to my success. Please note that past performance never guarantees future results, but sharing my strategies, I believe, will help anyone considering direct real estate investing.

#1: Avoid highly volatile real estate asset classes.

Some asset classes (the type of building) have demonstrated that they are much higher risk and prone to recessions than others. These include hotel and lodging properties, senior housing in many of its forms, and real estate used to produce oil and gas. I highly recommend avoiding these properties and potentially saving yourself from heartache.

Hospitality, for example, has been hit hard by all three recessions since 2000. In 2010, following the Great Recession, U.S. hotels considered distressed by Real Capital Analytics approached 2,500 properties with total debt of $40 billion. Many investors in these properties never recovered even their principal — they lost everything. Fast forward and the COVID-19 pandemic continues to wreak havoc on the hospitality asset class.

Senior care is another tough spot, with senior housing, assisted living, long-term care facilities and nursing homes all subject to regulations that increase the risk and stability of owning and operating them. And that was even before the pandemic created new challenges to caring for a particularly vulnerable population.

Properties used to produce oil and gas also carry above-average risk. Drilling and royalties from energy production are uncertain at best and highly volatile at worst. If an oil well doesn’t produce as expected despite the best due diligence, the underlying asset value can nosedive. Fluctuating oil prices from supply and demand shocks can have the same effect. Buyer beware.

#2: Avoid or at least seriously minimize the use of leverage.

It’s contrarian to invest in real estate without leverage, but it can be done quite effectively. Many of our clients don’t want to increase their risk profiles, especially at a stage of life where they find debt worrisome.

Fortunately, there are no-leverage (debt-free) real estate investments available including debt-free Delaware statutory trusts (DSTs) and debt-free real estate funds. With the pandemic still hovering all over the world and real estate subject to uncertainty and potential distress, a debt-free strategy can be highly attractive for risk-adverse investors such as myself. One thing’s for sure: With private real estate offerings that are debt free with no long-term mortgages encumbering the property, there’s no risk of lender foreclosure.

All debt isn’t bad, but a defensive real estate investment strategy makes limited or no use of debt to potentially mitigate the risks of leverage to an equity investment.

#3: Load your basket (or shopping cart) with more than one egg.

Often high-net-worth investors purchase their own properties. It’s a point of pride, and many find the idea of being a landlord attractive, at least initially. Increasingly, however, many investors have decided that the health crisis and economic headwinds are just too great to justify putting all their eggs in one basket, and that the over-concentration risk isn’t as appealing as in years past — that is, being the sole owner of an investment property.

It’s a timeless defensive strategy to diversify real estate investment capital into multiple properties, multiple geographic locations, multiple asset classes and with multiple tenants and business models. This can be accomplished easily through a range of DST, tenant-in-common (TIC), or limited liability corporation (LLC) investments, though the tax treatment of these structures is different.

Certainly diversification does not guarantee profits or protect against losses, but many investors realize it’s just as prudent to diversify their real estate portfolios as their stock portfolios. For example, instead of purchasing a 96-unit property in Tampa, he or she can diversify their capital across 5,000 multifamily units in a dozen different apartment communities across the Sunbelt and Mid Atlantic.

Or instead of purchasing one net lease medical building for $5 million, they can diversify their capital across 10 different single-tenant net lease properties including drugstores, e-commerce industrial distribution facilities, discount stores, kidney dialysis clinics and more.

#4: Co-invest with others with similar goals as yours.

It’s not mutually exclusive to be a private equity real estate investor and a co-investor — you can be both at the same time. DSTs, TICs, LLCs and qualified opportunity zone funds are among the vehicles you can co-invest in alongside others with similar goals and risk tolerance. Inherently, co-investing is a more defensive play than investing solo and tying up the majority of (or a large portion of) your net worth in a single asset in a single market.

There’s no shame in being a defensive real estate investor. In fact, at the end of the day, the approach may have even more potential to produce a consistent stream of monthly income and long-term appreciation as part of a diversified investment portfolio.

Dwight Kay is founder and CEO of Kay Properties and Investments, LLC, which operates a DST and 1031 exchange property marketplace.

Despite raising it as a possibility on the campaign trail, modifying or repealing the treatment of the tax benefits of like-kind exchanges has not been part of President Biden’s proposed tax reforms to pay for social services. That doesn’t mean that commercial real estate associations are standing pat, however. They have been actively advocating to preserve Section 1031 of the U.S. Internal Revenue Code, which defers capital gains taxes on property sales if the gains are reinvested in “like-kind” properties of equal or greater value.

Attention on the issue was first raised back in July when Biden outlined his proposed $775 billion “Caring Economy” Plan, which would provide funding for child and elderly care. The released 10-page proposal included eliminating the tax benefit for investors with incomes over $400,000 to help pay for the plan. More recently, with a potential $2 trillion infrastructure bill on the agenda, industry insiders are keeping a watch on like-kind exchanges as a potential funding mechanism for the bill.

For now, commercial real estate groups are signaling that their concerns are muted. As Suzanne Goldstein-Baker, who serves as co-chair of the Federation of Exchange Accommodators (FEA) Government Affairs Committee and is executive vice president/general counsel for Investment Property Exchange Services Inc., stresses, “There is no pending legislation to eliminate Section 1031 of the tax code or anything currently that poses a tangible threat.”

Changes to Section 1031 have not so far been mentioned as part of any specific tax reforms proposals by the administration. Moreover, it does not appear that tax reform is at the top of the Biden Administration’s priorities right now, says Alex Madden, vice president at Kay Properties & Investments, which provides online listings and access to 1031 eligible properties.

“Of course, there always is an intangible threat that it could get offered up as ‘pay for,’” Goldstein-Baker says.

For their part, industry groups are trying to stay ahead of the game. In fact, just two weeks ago, more than 30 industry organizations, including the Real Estate Roundtable, NAIOP, the Mortgage Bankers Association, the American Hotel & Lodging Association, Nareit and the National Apartment Association, among others, sent a letter to Secretary of the Treasury Janet L. Yellen outlining the benefits of the 1031 exchange transactions to the U.S. economy, including its potential to help the U.S. recover from the impact of the COVID-19 pandemic.

“Gains reinvested in new property through an exchange create a ladder of economic opportunity for small and minority-owned businesses and entrepreneurs, and generate much needed tax revenue for states and localities,” the letter states. “Also, like-kind exchanges increase the supply of affordable rental housing by filling gaps in housing supply not covered by other incentives.”

Whenever the like-kind exchange comes under scrutiny, which has happened multiple times over its 100-year history, its proponents are ever vigilant in educating members of Congress about the tax incentive’s benefits and importance to real markets and the economy, Goldstein-Baker notes. She says studies have shown that the 1031 exchange is a powerful economic stimulator that creates jobs and increases capital investment in property improvements.

Keeping a watchful eye

Despite these efforts, everyone in the industry involved in 1031 transactions is keeping a watchful eye out for possible reforms to this tax code since an income limit for eligibility was mentioned during the campaign, notes Madden.

Madden supports the notion that while many real estate investors benefit from the tax break, the ripple effect of 1031 exchange transactions, which represent 25 to 33 percent of all commercial and multifamily sales, can have a significant impact on local economies, as they involve a variety of ancillary services to process the transaction and renovate the property.

“Owners maintain, buyers renovate,” adds Baker, who notes that 1031 exchange transactions can create jobs and improve neighborhoods because they encourage capital investment. Madden also notes that improvements to replacement properties often trigger property reassessments that generate greater tax revenue for local governments than the property previously had provided.

Studies support these contentions, which might serve to discourage changes to the 1031 incentives.

A study entitled, “The Economic Impact of Repealing or Limiting Section 1031 LikeKind Exchanges in Real Estate,” published in 2015 by David C. Ling, professor of real estate at the University of Florida and Milena Petrova, associate professor of finance at Syracuse University, looked at the impact of like-kind exchanges on both the real estate market and tax revenue.

Their analysis, which included review of more than 1.6 million commercial real estate transactions that took place between 1997 and 2014, found the widespread use of Section 1031 improved liquidity and increased investment in the real estate market and building improvements. It also increased overall taxes paid to the Treasury—supporting the real estate industry’s thesis that the cost of Section 1031 is largely overstated and its benefits overlooked.

The study found that 88 percent of replacement properties are eventually disposed of in a taxable sale that generates approximately 19 percent more in taxable gains than non-exchange properties sold in conventional sales.

A 2015 Ernst & Young study, Economic Impact of Repealing Like-Kind Exchange Rules,” presented similar findings, but it also looked at the potential impact of a repeal on the U.S. economy. Ernst & Young’s findings suggested that elimination of this tax incentive would shrink the U.S. economy by up to $13.1 billion annually and reduce annual GDP by $8.1 billion, as a result of less investment, which was estimated to fall by $7.0 billion, and lower labor incomes, which would be reduced by about $1.4 billion.

Given these factors, many commercial real estate executives remain hopeful that the Biden Administration will avoid making changes to 1031 exchanges and will look for other funding sources to pay for expanded services and infrastructure improvements.

The highest profile professional real estate developers and investors are typically those who have won big or lost big — they made their names taking oversized risks that in some cases paid off handsomely and in other cases crashed and burned.

But real estate investing isn’t just for highfliers with nothing to lose. In fact, quite the opposite is true. Investors can take a decidedly defensive approach to building wealth through real estate investing, especially given the favorable tax treatment that rewards many aspects of real estate investment. (Consult your tax adviser to learn more.) To be sure, all investments carry risk, be they stocks, bonds or hard assets like real estate, but some investment strategies are less risky than others.

I’ve taken a generally conservative approach to real estate investing with much success. These strategies are hallmarks of my approach. They’ve helped mitigate the risks of real estate ownership and investment while maximizing the potential to achieve income (positive cash flow), shelter income from tax, and realize asset-value appreciation.

Tip #1: Avoid recession-prone, highly volatile real estate asset classes

Some asset types have demonstrated that they are much higher risk and recession-prone than others. These include hotel and lodging properties, senior housing in most of its forms, and real estate used in the production of oil and gas. Avoid these properties.

Hospitality, for example, has been hit hard by all three recessions since 2000. In 2010, following the Great Recession, U.S. hotels considered distressed by Real Capital Analytics approached 2,500 properties with total debt of $40 billion. Many investors in these properties never recovered even their principal — they lost everything. More recently, we’ve seen historic disruptions by the COVID-19 pandemic as travel both for business and leisure ground to a halt. (Marriott, as one example, had the worst quarter of its entire company history during the pandemic.)

Senior care is another sore spot, with senior housing, assisted living, long-term care facilities and nursing homes all subject to regulations that increase the risk and stability of owning and operating them. And that was even before the pandemic layered onto these types of properties the challenges of a particularly vulnerable population during a catastrophic public health crisis.

Also volatile are properties used for the production of oil and gas. Drilling and royalties from energy production are uncertain at best and highly volatile at worst. If an oil well doesn’t produce as expected despite the best due diligence, the underlying asset value can nosedive. Fluctuating oil prices from supply and demand shocks can have the same effect. Buyer beware.

Tip #2: Don’t load up on debt

It sounds contrarian and it is, actually, because it can be easy to borrow against real estate. People frequently do it to minimize their equity investment and load up on properties. But while many advisers tout the benefits of leverage, we tout the risk of leverage. Many of our clients don’t want to increase their risk profile, and since they’ve often already paid off properties — their homes and sometimes investment properties — they don’t want to go back into debt especially at a stage of life where they want to lower their potential risk and not increase it.

It’s understandable. Fortunately, there are no-leverage real estate investments available, including debt-free Delaware Statutory Trusts (DSTs). With the pandemic hovering all over the world and real estate subject to uncertainty and potential distress, a debt-free strategy can be attractive. One thing’s for sure: With private real estate offerings that are debt free with no long-term mortgages encumbering the property, there’s no risk of lender foreclosure.

The Delaware Statutory Trust has attracted the attention of major investment managers and have become more prevalent on investment product platforms. To explain the trend toward DSTs — including why they are attractive to an aging cohort of real estate owners and those seeking tax benefits — we welcome to the program Chay Lapin, senior vice president of Kay Properties & Investments. (02/2021)

Listen here! 

Kay Properties closed 2020 with a substantial increase in deal volume. Last year, the firm, which operates a 1031 exchange marketplace, completed $408 million in deals, a 77% increase from 2019 when deal volume totaled $230 million. While high net worth investors drove the activity, the firm also saw new investors from a wide range of disciplines.

Dividend-paying stocks and interest-bearing bonds aren’t the only ways to generate potential investment income. Real estate has the potential to meet that objective as well.

In fact, income generation is a key reason why many people diversify their investment portfolios to include different types of real estate assets, be they commercial, net lease, self-storage, medical or multifamily. Many real estate investments are predictable and durable in their ability to generate monthly income—although rental income is never guaranteed since real estate is a living, breathing asset.

During the pandemic some assets are performing particularly well, such as leased properties occupied by essential businesses, including drugstores, medical services and industrial distribution facilities that deliver products purchased through e-commerce.

Diversification is another reason to consider investment real estate, because the performance of privately-owned real estate assets typically does not correlate with the market for publicly-traded stocks and bonds. In other words, investment real estate is a potential hedge against the volatility of the equities market, a goal that we have found many investors are keenly interested in. It is important to note that diversification does not guarantee profits or protect against losses. However, it is considered by many to be a prudent tool when constructing an investment strategy.

There are many ways to participate in the investment real estate market in pursuit of income, appreciation and diversification. Here’s a look at four ways.

Real Estate Investment Trusts (REITs)

The market for publicly-traded REITs is well-established, and many people access the market through their retirement plans and stock brokerage accounts. REITs are typically companies that own and operate real estate, so you’re investing in the company, not just the underlying real estate. REITs pay out their income in the form of dividends, which are taxable.

The biggest downside to REIT investments (aside from their high correlation to the overall stock market and the volatility it ensues) is the absence of the ability to take advantage of a 1031 exchange—and thus defer taxation—on any capital gains from the sale of shares.

Direct ownership of triple-net leased property

Triple-net leased properties are typically retail, medical or industrial facilities occupied by a single tenant. With a property of this type, the tenant—not the owner—is responsible for the majority, if not all, of the maintenance, taxes and insurance expenses related to the property. While these benefits can be potentially attractive, direct ownership of such properties comes with distinct downsides, starting with concentration risk if an investor places a large portion of their net worth into a single property with one single tenant.

Other risks are potential exposure to a black swan event, such as COVID-19, if the tenant turns out to be hard hit (think restaurants and non-essential business retailers) and management risk. I have owned dozens of triple-net properties over my career and they are anything but passive and hands-free—they require intensive asset management to properly operate them in a prudent way.

Delaware Statutory Trusts (DSTs)

A DST is an entity used to hold title to investments such as income-producing investment real estate. Most types of real estate can be owned in a DST, including industrial, multifamily, self-storage, medical and retail properties. Often, the properties are institutional quality, similar to those owned by an insurance company or pension fund, such as a 500-unit class-A apartment community or a 50,000-sq.-ft. industrial distribution facility subject to a long-term net lease with an investment grade rated Fortune 500 logistics and shipping company. The asset manager (the DST sponsor company) takes care of the property day-to- day and handles all investor reporting and monthly distributions.

DST investments are used by those investors seeking a cash investment with a typical minimum of $25,000, as well as those seeking a turnkey 1031 tax-deferred exchange solution.

Tenants-in-Common properties (TICs)

A TIC structure is another way to co-invest in investment real estate. With a TIC, you own a fractional interest in the property and receive a pro rata portion of the potential income and appreciation of the real estate. As a TIC investor you will typically be given the opportunity to vote on major issues at the property, such as whether to sign a new lease, refinance the mortgage and sell the property.

Although TIC investments and DSTs have their nuances and differences, they often will hold title to the same types of investment properties. While the DST is generally considered the more passive investment vehicle, there are some circumstances in which a TIC is desirable, including if the investors wish to utilize a cash-out refinance after owning the TIC investment for a few years in order to potentially receive a large portion of their invested equity back, which can be invested in other assets. Both DSTs and TICs can qualify for 1031 exchange tax treatment (via Revenue Ruling 2004-86 and Revenue Procedure 2002-22), which allows capital gains tax to be deferred if the gains are reinvested in other investment properties. And both structures are used by direct cash investors seeking diversification out of the stock market into passive real estate investments.

Bottom line, dividend-paying stocks and bond investments aren’t the only path to achieve potential yield in the yield-starved environment we find ourselves in at the beginning of 2021. Real estate offers the potential for income, as well as appreciation and diversification, plus some welcome tax advantages to shelter rental income and defer capital gains taxes.

• $408 million in equity investments from high-net-worth investors in 2020

• DSTs, Real Estate Funds and other investments demonstrate their attractiveness to investors seeking to potentially minimize tax consequences, generate income and build wealth

LOS ANGELES, Jan. 27, 2021 (GLOBE NEWSWIRE) -- Kay Properties, which operates an online 1031 exchange property and real estate investment marketplace, topped $408 million in investments from high-net-worth investors in 2020, the firm said today. The volume, a record for the company, is 77 percent higher than the previous record set in 2019, when the firm saw $230 million invested on its platform.

Kay Properties (www.kpi1031.com) is a national investment firm specializing in Delaware Statutory Trust (DST) investments and private equity real estate investments. The vast majority of investments made on the Kay Properties platform are for 1031-exchange replacement properties, and cash investments into real estate funds and other vehicles. DST investments are an allowable option for replacement properties for investors who have recently sold other real estate assets and are seeking to defer taxation on their gains by reinvesting the proceeds in qualifying properties of a similar kind. So-called “like-kind exchanges” are allowable under U.S. Internal Revenue Code Section 1031.

The $408 million invested on the Kay Properties platform in 2020 was invested in $6 billion of real estate offerings representing 43 million square feet of space. Investments were made in multifamily, manufactured housing, single tenant net lease, industrial, self-storage and medical properties.

Based on publicly available information and understanding of industry participants, Kay Properties believes it maintains one of the largest syndicated 1031 exchange and real estate investment marketplaces online, with some of if not the highest investment volume in the U.S. While a large amount of people investing in properties on the kpi1031.com marketplace are seeking like-kind exchange properties, all high-net-worth investors are welcome to participate in the offerings on the company’s marketplace.

“2020 was a remarkable year for the 1031 exchange property market, including DSTs, as well as the private real estate investment offering market,” says Dwight Kay, CEO and Founder of Kay Properties. “Despite and sometimes even because of the pandemic, property owners were motivated to sell. For investors with capital gains, reinvesting the proceeds in qualifying properties including DSTs allows them to defer capital gains taxes. That’s not the only reason people invest in DST properties and private real estate investments. They also can be part of a diversification strategy with the potential for appreciation and monthly income.”

“Over the years, we’re pleased to have helped thousands of high-net-worth investors across the country deploy a proven, highly effective investment and tax strategy. We also would like to thank all of our investors from over the years as well as the numerous DST sponsor companies and other real estate operators that we have worked closely with. The kpi1031.com online marketplace truly has become a best-in-class robust platform connecting high-net-worth investors with quality real estate offerings and equally a place for real estate sponsors and operators to connect with thousands of high-net-worth investors seeking to deploy capital into real estate offerings. A perfect match in our opinion and one we are incredibly grateful for. We will continue to work tirelessly on behalf of all of our investors, team members and industry sponsor partners to, Lord willing, continue this great path forward.”

Investors can view current offerings on the Kay Properties online marketplace at www.kpi1031.com.

Last year, the homeownership rate in the U.S. hit a post-Great Recession high, reaching about 68%, according to the U.S. Department of Commerce. Despite the pandemic (or maybe because of it), the housing market remains relatively strong. Low interest rates have helped the sector, including by allowing people to refinance their mortgages and save money every month.

While homeownership is a significant contributor to Americans’ wealth, it’s no substitute for the potential benefits of investment real estate. Investment properties may appreciate in value — like your residence — but also potentially generate monthly income while you own them — unlike your home.

Income-generation is a key reason many people diversify their investment portfolios to include different types of commercial, net-lease, self-storage, medical and multifamily real estate assets. And who wouldn’t benefit from additional monthly income? Certainly, retirees or near-retirees would, as would most other people. Additional monthly rental income can be used to support living costs, be reinvested or be saved.

Real estate investments that are cash-flow positive will potentially generate monthly income for investors. Notably, many real estate investments are predictable and durable in their ability to generate monthly income — although rental income is never guaranteed as real estate is not a bond but a living, breathing asset. During the pandemic some assets are performing particularly well, such as leased properties occupied by essential businesses, including drugstores, medical services, and shipping company industrial distribution facilities that deliver products purchased through e-commerce.

There are multiple ways to participate in the investment real estate market in pursuit of income and appreciation. Here’s a look at four ways to invest in real estate with income potential.

Real Estate Investment Trusts (REITs)

The market for publicly traded REITs is well established, and many people access the market through their retirement plans and stock brokerage accounts. REITs are typically companies that own and operate real estate, so you’re investing in the company, not just the underlying real estate. REITs pay out their income in the form of dividends, which are taxable.

The biggest downside to REIT investments (aside from their high correlation to the overall stock market and the volatility it ensues) is the absence of the ability to take advantage of a 1031 exchange — and thus defer taxation — on any capital gains from the sale of shares.

An example: Bob has invested $100,000 in a REIT that owns shopping centers. There is no monthly income provided by the REIT, but every quarter the company pays out the majority of its earnings, if any, in the form of dividends. The dividends are taxable as ordinary income. When Bob sells his shares, if there is a gain he will pay capital gains tax on the gain.

Direct Ownership of Triple-Net Leased Property

Triple-net leased properties are typically retail, medical or industrial facilities occupied by a single tenant. With a property of this type, the tenant — not the owner — is responsible for the majority, if not all, of the maintenance, taxes and insurance expenses related to the real estate. While these benefits can be potentially attractive, direct ownership of such properties comes with distinct downsides, starting with concentration risk if an investor places a large portion of their net worth into a single property with one tenant. Other risks are potential exposure to a black swan event, such as COVID-19, if the tenant turns out to be hard hit, and management risk.

I have owned dozens of triple-net properties over my career and they are anything but passive … they require intensive asset management to properly operate them.

LOS ANGELES, Dec. 22, 2020 (GLOBE NEWSWIRE) -- Kay Properties is proud to announce the successful completion of a family's 36-million-dollar 1031 exchange diversified into 15 Delaware Statutory Trusts.

Chay Lapin commented, "At Kay Properties we have specialized in providing a far higher level of DST investing services than found at typical providers of DSTs. We specialize in DST investments thereby allowing us to provide full-service resources for our clients as they are going through their 1031 exchange situation and consideration of DST properties. As always, working with our many high-net-worth investors, there are a lot of moving parts. Kay Properties has a full team behind our clients that provides them with much needed resources for their 1031 exchanges into DSTs such as our 1031 investor marketplace at www.kpi1031.com, 1031 DST educational process, DST property due diligence, mystery shopping each DST property, transaction coordination and our Kay internal investor relations team."

Kay Properties and Investment's Senior Vice President Chay Lapin and Vice President Steve Haskell spearheaded the 1031 exchange. They guided the transfer of equity from a multifamily apartment building portfolio in California that the family had owned for many years to a diversified portfolio of 15 DSTs with over 19 properties in 10 states. The replacement property DST portfolio consisted of a variety of industrial, self-storage, medical, net lease and multifamily assets. Kay Properties and Investments coordinated with eight different Delaware Statutory Trust sponsors to swiftly execute the exchange prior to the closing of the client's 45-day window.

Steve Haskell stated, "We are appreciative of the many DST sponsors we worked closely with on this exchange. At Kay Properties the platform we provide via the kpi1031.com marketplace is a welcome relief to investors that previously had only worked with one stockbroker who really has little to no experience selling securitized real estate via a 1031 exchange -- which unfortunately is how many DST investors end up over-allocating their 1031 dollars into the wrong DST offerings, at the wrong leverage amounts and in the wrong asset classes when compared to their goals and objectives. Education is of utmost importance in the DST 1031 industry, and unfortunately many participants that sell these types of offerings are themselves not educated as to how DST investments work and, as a result, the clients are the ones that can suffer greatly. We have seen it over and over and have many clients we have inherited that told us they wish they had known about Kay Properties and the www.kpi1031.com marketplace on their previous exchanges. This was an example of a family of clients that were able to fully educate themselves on the DST 1031 investment process while working with our entire Kay team."

Dwight Kay, Founder and CEO of Kay Properties, concluded, "Another satisfied customer added to the list of thousands nationwide who have utilized Kay Properties and the www.kpi1031.com marketplace for their 1031 exchange and cash investments. We are thankful to the Lord for all of His blessings over the years, thankful to our many DST sponsor company partners who we work closely with and thankful to the thousands of Kay Properties clients nationwide."

Millions of Americans invest in alternative assets, including real estate. It’s an important step to diversify a portfolio with investments that don’t necessarily correlate with the stock or bond markets.

Here are five tips to help construct a diverse real estate investment portfolio that has the potential to generate income and appreciation. At the end of the day, diversification does not guarantee profits or protect against losses, but it can potentially help!

Step #1: Diversify your investments by property type.

Investors should diversify their real estate portfolios by asset type (also known as asset class) to avoid the risk of over-concentration in one particular category or class of property, just as you avoid over-concentration in any one stock or single investment. That means investing in multiple types of income property, from multifamily to industrial to net-leased retail to self-storage to medical office.

Step #2: Diversify your investments by geographic location.

Investors should diversify their real estate portfolios across geography to avoid the risk of over-concentration in a particular local or regional market. In other words, make sure your investments are in multiple markets, ideally in different regions around the country to potentially insulate yourself from a single geographic event such as a hurricane, earthquake, sweeping rent control measures or other tenant- friendly laws or regulations that could disrupt investment performance.

Step #3: Avoid higher-risk and volatile property types.

All investment real estate is not created equal. Some asset types have demonstrated they are much higher risk and recession-prone than others. These include hotels and lodging properties, seniors housing in all its forms, and real estate used in the production of oil and gas.

Hospitality, for example, has been hit hard by all three recessions since 2000 and was especially disrupted by the COVID-19 pandemic as travel both for business and pleasure ground to a halt. Senior care is another sore spot, with seniors housing, assisted living, long-term care facilities and nursing homes all subject to regulations that increase the risk of operations and ownership, as well as laws that can greatly affect an asset’s performance. Oil and gas royalties and drilling, likewise, are subject to higher volatility by their very nature. If an oil well doesn’t produce as expected despite due diligence, the underlying asset value can take a serious tumble.

Step #4: Consider the different types of passive real estate investment options.

Unless you want to actively manage your investment properties, passive real estate investments can be the way to go as you are searching for real estate investment opportunities that you don’t have to manage yourself. There are a range of options to choose from, including publicly-traded real estate investment trusts (REITs), Delaware Statutory Trusts (DSTs), Tenants-in-Common (TIC) properties, debt-free real estate funds (those that do not have long-term mortgages associated with them, which reduces the risk potential to investors) and private equity funds, including Qualified Opportunity Zone (QOZ) funds.

REITs: The market for publicly-traded REITs is well-established, and many people access the market through their retirement plans and stock brokerage accounts. REITs are typically companies that own and operate real estate, so you’re investing in the company, not just the underlying real estate. REITs pay out their income in the form of dividends, which are taxable. The biggest downside to REIT investments (aside from the high correlation to the overall stock market and the volatility it ensues) is the absence of a key tax benefit (see Step #5 below).

DSTs: Most types of real estate can be owned in a DST, including industrial, multifamily, medical office and net lease retail properties. Often, the properties are institutional quality, similar to those owned by an insurance company or pension fund. The asset manager takes care of the property day-to-day and handles all investor reporting and monthly distributions of the properties’ potential cash flow to investors.

TICs: A TIC structure is another way to co-invest in real estate. With a TIC, you receive a pro rata portion of the potential income and appreciation of the real estate. As a TIC investor you will typically be given the opportunity to vote on major issues at the property, such as whether to sign a new lease, refinance the mortgage and sell the property.

QOZ Funds: A fund of this type can invest in real property or operating businesses within a so-called Opportunity Zone, typically a geographic area in the U.S. that has been so designated because it may be underserved or neglected. The time horizon of the fund may be as long as 10 years, which means tying up your capital for that length of time in an illiquid real estate fund.

Step #5: Recognize the potential tax benefits of real estate investing.

Real estate in the form of direct ownership is one of the most tax-advantaged investment classes in the United States. Depreciation deductions are available to all investors, and any real estate investment losses may be deductible against other income, which could potentially reduce your tax bill. Additionally, direct real estate investments qualify for like-kind exchange treatment, otherwise known as a 1031 exchange, which can save investors approximately 40 percent on their tax bills when there are net gains on property sales.

Notably, of the four investment types discussed above, only DSTs and TICs qualify for the highly attractive 1031 exchange tax treatment, regardless of when assets are sold. In contrast, with QOZ Funds, there are some potential tax benefits if the investments are held for the required period of time. With REITs, all gains (if any) are subject to full capital gains taxation.

So, what might a diversified, passive (management-free) investment real estate portfolio look like? Here’s how one investor could allocate $500,000 into commercial and multifamily real estate to potentially generate passive income and appreciation:

• Invest $100,000 in an industrial warehouse distribution facility with a long-term net lease to a company like Amazon, FedEx, Coca-Cola or Frito-Lay
• Invest $100,000 in a medical dialysis center with a long-term net lease to a company like Fresenius or DaVita
• Invest $100,000 in a multifamily apartment community with 300 units in Texas
• Invest $100,000 in a self-storage facility in Florida
• Invest $100,000 in a debt-free multifamily property with 60 units in Tennessee

With a passive real estate portfolio like this, the investor may be diversified by asset type, tenant base and geography. They’ve avoided more cyclical and highly volatile asset classes such as seniors housing, assisted living and long-term care, hotel and resort properties, and oil and gas royalties and wells. The investor should also prudently consult with their accountant and attorney about the potential risks and tax advantages of real estate investing, including 1031 exchanges that allow the tax on gains to be deferred.

This is a great place to start.

Dwight Kay is founder and CEO of Kay Properties and Investments, LLC, which operates a 1031 exchange property marketplace.

LOS ANGELES, Dec. 03, 2020 (GLOBE NEWSWIRE) -- Kay Properties today announced the completion of a 1031 DST investment for a mother-daughter duo. The pair sold a vacation rental property they owned for many years. They were eager to exit the highly management-intensive environment of operating vacation rentals and enter into a more passive, diversified investment structure such as the DST. They utilized the Kay Properties 1031 DST marketplace at www.kpi1031.com to invest in a prepackaged multifamily DST portfolio.

Kay Properties team helps with 1031 DST investment

The Delaware Statutory Trust exchange investment was completed by Kay Properties and Investments team members Chay Lapin, Senior Vice President, and Matt McFarland, Vice President.

Chay Lapin, Senior Vice President, stated, “We are grateful for the opportunity to help another family complete a 1031 DST exchange. They now are involved in a more passive investment environment to better suit their lifestyle. Our clients approached us with a very high level of sophistication of buying and selling their own real estate over many years. When considering all their options, they decided that the Delaware Statutory Trust structure was best suited for their needs.”

Lapin continued, “Through on and off correspondence for over a year and a half, the clients were able to complete their own due diligence on DSTs. They spent time with us learning about how DSTs could potentially help them all while utilizing the DST investment marketplace at www.kpi1031.com/marketplace.”

Teamwork at Kay Properties completes 1031 DST in timely manner for clients

Matt McFarland, Vice President at Kay Properties, stated, "This particular client was able to exchange out of a management-intensive vacation rental. The 1031 up leg was a multifamily DST offering with multiple properties totaling over 900 units. Needless to say, this $100M+ multifamily portfolio is an investment that would have been out of reach to many investors if it weren’t for the DST structure.”

Recent survey research by National Real Estate Investor magazine indicates that nearly 60% of high-net-worth investors are expected to increase their allocation to investment real estate in the next 12 months. Millions of Americans invest in alternative assets, including real estate. It’s an important step towards diversifying a portfolio with investments that don’t necessarily correlate with the stock or bond markets.

Once you decide to invest in real estate, the challenge is how to build a diverse portfolio.

Buying a property outright and actively managing it yourself is one way to participate in the market, but that typically requires a substantial initial investment — often hundreds of thousands of dollars to be paid at once. A downside of this approach is that you put all your eggs in one basket.

1031 exchange demand is driving the majority of transaction volumes during the pandemic. While some new opportunistic capital has entered the market, the majority of investment demand for CRE assets is coming from 1031 exchange buyers. The activity has not only helped to prop up transaction volumes but has also helped to stabilize pricing through the pandemic.

LOS ANGELES, Aug. 10, 2020 (GLOBE NEWSWIRE) -- Kay Properties and Investments today announced that one of their custom 1031 exchange Delaware Statutory Trust (DST) offerings has gone full cycle and was sold on behalf of investors. The offering was a multi-tenant office property located in the Tampa, Fla. MSA and was made available exclusively to Kay Properties clients in 2017.

The offering generated a total return of 131.42% for the 1031 exchange and direct cash investors.* This DST offering was a custom 1031 DST offering made available only to Kay Properties clients who were accredited investors under Regulation D Rule 506(c).

Dwight Kay, CEO and Founder of Kay Properties, commented, "We are extremely pleased with the opportunity to provide these returns for our investors in light of the COVID-19 pandemic and the headwinds facing multi-tenant office properties. The investment was opportunistic in nature as we were able to generate a risk-adjusted return for our investors without utilizing leverage. The offering was a debt-free DST and we are proud to say that the returns have proven on this offering to be superior to many leveraged DSTs that were available during the same time period.* Many of the 1031 investors involved in this DST offering decided to complete another 1031 exchange investment with Kay Properties via the www.kpi1031.com marketplace for 1031 exchange offerings and we are thankful for the opportunity to be of service to them and their families."

Chay Lapin, Senior Vice President of Kay Properties, said, "Our property located in the Tampa, Florida MSA allowed our investors to be in a debt-free position to mitigate risk and have potential for upside at the same time. We are very pleased to provide our investors a positive total return on their investment, especially during a global pandemic. During the beginning of the global crisis and economic issues the investors were able to sleep at night knowing at the end of the day they were debt free should the various world events affect their property, there was no risk of lender foreclosure."

Jason Salmon, Senior Vice President and Managing Director of Real Estate Analytics, added, "I'm pleased that our investors were able to participate in a real estate deal that resulted in a profitable sale with monthly income along the way. Most of our clients in this DST investment offering had invested in multiple DSTs with multiple DST sponsor companies as part of a diversified strategy, and similarly in this case, the clients opted to 1031 exchange their sale proceeds into additional DST real estate."

Betty Friant, Senior Vice President of Kay Properties, concluded, "This lends even more credence to our recommendation that if investors are debt free when they sell a property in a 1031 exchange, they should try to remain debt free. It takes a big layer of risk out of the equation when investing in real estate as it's extremely hard to lose a property to foreclosure if there is no bank involved! In addition to DST 1031 properties that have leverage associated with them, Kay Properties also has a number of debt-free DST properties available in asset classes such as multifamily, industrial distribution centers, medical office, and retail/pharmacy.  Investors can see our current offerings by creating a free account at www.kpi1031.com, our online marketplace for 1031 exchange offerings, or by calling (855) 899-4597."

*Past performance does not guarantee or indicate the likelihood of future results. Diversification does not guarantee profits or protect against losses. All real estate investments provide no guarantees for cash flow, distributions or appreciation as well as could result in a full loss of invested principal. Please read the entire Private Placement Memorandum (PPM) prior to making an investment. This case study may not be representative of the outcome of past or future offerings. Please speak with your attorney and CPA before considering an investment.

*The total return represents the total sales proceeds and distributions through the life of the asset, net of fees. No representation is made that any investment will or is likely to achieve profits or losses similar to those achieved in the past or that losses will not be incurred on future offerings.

LOS ANGELES, July 16, 2020 (GLOBE NEWSWIRE) -- Kay Properties and Investments today announced the completion of multiple 1031 DST exchanges for owner-operators of real estate who are currently in the winding down phase of their investment career. The 1031 exchange clients utilized the Kay Properties 1031 DST marketplace at www.kpi1031.com for a number of months to educate themselves on how DST 1031 properties for sale would potentially fit within their portfolio.

The Delaware Statutory Trust 1031 exchange investments were completed by Kay Properties and Investments team members Betty Friant, Senior Vice President, and Orrin Barrow, Vice President.

Dwight Kay, the founder and CEO of Kay Properties, stated, “Many investors are at the point in their lives where they are no longer looking to deal with the notorious three T’s — toilets, tenants and trash. They have built their wealth through methodical and savvy purchasing of real estate. Now they are looking for 1031 exchange alternatives and investment vehicles to be able to defer their taxes while also purchasing quality real estate that is passive. This is where the kpi1031.com marketplace fits in. We are a comprehensive 1031 DST marketplace that works on behalf of our clients to match them with quality DST offerings and DST sponsors to create a truly diversified 1031 portfolio.”

Betty Friant, Senior Vice President of Kay Properties, added, “The clients stated early on in conversations that they were considering other individuals that had knowledge of 1031 exchange opportunities. However, once the client was able to access our personnel and kpi1031.com platform, he decided that Kay Properties was the obvious choice for his DST 1031 investments. Our client was looking for transparent knowledge about the DST 1031 industry as well as the past performance of many asset managers and DST sponsor companies in the industry.”

“We have the connections and knowledge of the DST 1031 sponsor industry that allowed for us to have comprehensive conference calls with DST sponsor companies and key personnel to help educate our clients on the marketplace and how many of the DST sponsors operate. Our expertise, network and many years in the DST 1031 investment industry has allowed us to be considered by many to be the leading 1031 DST investment company in the country.”

Orrin Barrow, Vice President of Kay Properties, stated, "At Kay Properties, we take the time and have the team and expertise to be able to craft a portfolio of DST investments based on each investor’s needs, requests and criteria. As of July 2020, we have helped these clients complete roughly $3.1 million of DST 1031 investments. This exchange was the beginning of a series whereby they have roughly $50 million of real estate they are looking to exchange over the next few years. They retained our firm because of our comprehensive kpi1031.com platform, our expertise in the DST 1031 marketplace and our attention to detail as it pertains to their very specific financial situation.”

Many syndicated real estate investments miss out on a major tax benefit, but there are some ways to do your deal that avoid that issue.

The rise in online real estate investing in recent years has been remarkable. As the global consulting firm EY estimates, the online real estate investing market worldwide is expected to be $8.3 billion in 2020, with no sign of slowing.

LOS ANGELES, June 18, 2020 (GLOBE NEWSWIRE) -- Kay Properties and Investments today announced the completion of a 1031 exchange for a family who has owned and operated commercial investment properties for many years.

The family has built considerable wealth over decades of owning and operating a portfolio of their own commercial properties and reached a point where they no longer wished to actively manage their real estate. The properties have experienced considerable capital appreciation, creating a very large tax event if they weren’t to utilize a 1031 exchange to defer their taxes due upon sale. After meeting in person and conducting vigorous due diligence of Kay Properties and the DST structure, the family chose the Kay Properties 1031 marketplace at www.kpi1031.com to complete their 1031 tax deferred exchange into multiple DST 1031 investment offerings.

The Delaware Statutory Trust exchange investments were completed by Kay Properties and Investments team members Betty Friant, Senior Vice President, and Matt McFarland, Associate.

Friant stated, “Our clients discovered DSTs through researching various passive investment opportunities for an upcoming sale. Through their research they were pointed to Kay Properties and began to learn more about Delaware Statutory Trust properties as an option for them to consider. Although they had the capital to purchase a single high-quality NNN property on their own, they ultimately weren’t comfortable allocating $6 million into a single property and chose instead to diversify. The DST structure afforded the clients to the ability to participate in the same caliber of asset, only on a more diversified basis.”

Friant continued, “At Kay Properties, we are proud of the diversification capabilities we can offer our clients through our relationships with many DST sponsor companies who do an amazing job acquiring the real estate, structuring it as a DST and managing the property on behalf of our clients.”

McFarland added, “At Kay Properties, we have access to nearly the entire marketplace of DST properties. This allows us, when working with a particular client, the true ability to make recommendations based on the client’s objectives and long-term goals. Through the access to over 25 sponsor firms and 20-40 different DST investments at any given time, we are able to help create a well-diversified portfolio for our clients. This particular client was able to purchase eight different DSTs with seven different sponsor firms. The real estate held in the DSTs they invested in amounted to over 890,000 square feet of commercial office, medical office, pharmaceutical, necessity retail, automotive, and healthcare related properties, geographically diversified across 14 states.”

McFarland continued, “The family most enjoyed the flexible nature of the DST as it pertains to equity allocation. With the typical minimum investment amounts being $100,000, this family and so many others are able to allocate specific amounts of their equity into individual DST offerings that make sense regarding their overall financial situation, goals, objectives and risk tolerances.”

LOS ANGELES, May 18, 2020 (GLOBE NEWSWIRE) -- Kay Properties and Investments today announced that the Kay team was able to successfully help a group of sophisticated owners who were exiting a large portfolio of hotel properties complete their 1031 exchange into a diversified portfolio of DST (Delaware Statutory Trust) investments.

Dwight Kay, Founder and CEO of Kay Properties, stated, "The principals of this specific investment group had invested with us many years ago on a smaller 1031 exchange into DST properties and as such they were comfortable with the kpi1031.com marketplace to access DST exchange properties for this larger exchange."

Kay continued, "Our clients were able to get a large portion of their portfolio out of the hospitality industry and diversify across various asset classes within the DSTs. Their timing was impeccable in that they sold their portfolio just a few months prior to the lockdown beginning from COVID-19."

Chay Lapin, Senior Vice President, added, "This 1031 exchange had a lot of moving parts due to there being multiple ownership entities and strict 1031 exchange timeframes. We had to work extensively with the clients' CFO to make sure we got him everything they needed to complete their 1031 exchange." Lapin continued:

"One of the benefits of working with Kay Properties and Investments is the team that Mr. Kay has put together. We have a dedicated 1031 exchange team of up to 20 people who help our clients through the educational process to every detail of the closing process. Our Kay team departments consist of our senior executives whose goal is to educate clients and explore various 1031 exchange investment options. We also are one of the few 1031 DST exchange firms that has an internal legal team, accounting team, due diligence team, transaction team and closing team that are here to provide valuable resources for our clients."

"On this particular exchange we worked very closely for many months with eight DST sponsor companies. Many of the largest DST sponsor companies in the DST industry that we work with have told us many times over the years that we are the industry leader in the DST space. Due to our DST sponsor relationships we were able to help our client complete the purchase of over $64,000,000 of DSTs successfully. We believe that with our Kay team we were able to provide the options and resources that most DSTs firms cannot due to the fact that they are much smaller firms or are financial planners. Our goal at Kay Properties is to provide extreme specialization for our clients within the DST real estate investment realm, and this large 1031 DST exchange transaction is another solid example of us providing real value to our clients."

LOS ANGELES, May 06, 2020 (GLOBE NEWSWIRE) -- Kay Properties and Investments is honored to announce the completion of a 1031 exchange five years in the making. When the clients reached out to Kay Properties and Investments (www.kpi1031.com) looking for replacement properties after the sale of their 2,000+ acre ranch, they were trying to determine their options.

Kay Properties Vice President Alex Madden stated, “After looking around the industry our clients very quickly decided to work with Kay Properties and Investments for a few reasons including the breadth of DSTs available on our platform, the expertise and knowledge of the industry, and our team approach to clients’ 1031 exchanges.”

Senior Vice President Chay Lapin added, “I want to thank the eight different DST sponsor firms who helped our clients diversify across asset classes including: Multifamily, Investment Grade Corporate Headquarters, Self-Storage, Student Housing and Investment Grade Medical Office. Our Kay Properties team was able to utilize eight of our DST sponsor company relationships and experienced team members to build a diversified portfolio of 1031 exchange replacement properties. Our team was able to help them complete the majority of their 1031 exchange before their 45-day identification period was even over, with the remainder closing only a few days later.”

Lapin went on to say, “Our Vice President, Alex Madden, did an excellent job staying with our clients through the entire education process. The clients were pleased with their 1031 exchange experience and they very quickly began asking about further investment opportunities available through Kay Properties, and we are currently helping them evaluate and complete additional investments.”

Private market real estate investors—be they experienced in real estate syndication or new to the asset class—have been exposed to many more investment opportunities since President Obama signed the JOBS Act into law in 2012.

Among other things, the law eliminated the ban on general solicitations and general advertising of many private real estate offerings that were structured as Regulation D, Rule 506(c) offerings. As a result, the market for private equity real estate has expanded and become more transparent, with more investors having more options to invest in commercial and multifamily real estate with the potential to generate cash flow and appreciation over time.

The subsequent rise in online real estate investing has been remarkable. As EY estimated last year, the online real estate investing market around the globe is expected to be $8.3 billion in 2020, with no sign of slowing. (We actually think that’s a conservative number, depending on how online real estate investing is defined.)

For all the benefits of investing with the crowd, there is one downside to many syndicated investments that every real estate investor should know. Most co-investment opportunities are in the form of limited partnerships (LPs) or limited liability companies (LLCs). That’s not necessarily bad, except that those forms of syndicated ownership don’t qualify for one of the most advantageous real estate tax benefits available in the U.S.: 1031-exchanges.

Also known as like-kind exchanges, 1031s allow investors to defer taxes on capital gains at the time real property investments are sold if the net equity from the sale is reinvested into a similar investment or business property of the same or greater value. According to the Internal Revenue Service: “Properties are of like-kind if they’re of the same nature or character, even if they differ in grade or quality. Real properties generally are of like-kind, regardless of whether they’re improved or unimproved.”

For example, an apartment building could be exchanged for a warehouse, a warehouse for a piece of raw land, a piece of raw land for a single-family rental property, etc.

The net effect of 1031 exchange investing: the initial invested capital and the gain can continue to grow, potentially without immediate tax consequences. Then, if and when the new investment is sold without the equity reinvested in another exchange property, the prior gain would be recognized. There are some finer points; investors should consult their tax or legal advisors prior to selling or exchanging a property, as everyone's tax situation is different.

As a hypothetical example, if an investor places $100,000 of capital into a crowdfunded LLC offering that is purchasing an apartment building, and the property sells after a few years and has a gain, that investor will be subject to depreciation recapture tax of 25 percent, federal capital gains tax of 15-20 percent (depending on their income tax bracket), state capital gains tax of 0-13.3 percent (depending on the investor’s home state) and an additional 3.8 percent Medicare surtax. All this means that the gain from the crowdfunded investment may be subject to taxation of 20-45 percent or more, leaving the investor with much less of the total investment dollars to reinvest.

However, if that investor had participated in a 1031 exchange program with the $100,000 investment, he or she would have been able to defer 100 percent of the potential gain and depreciation recapture tax utilizing a 1031 exchange and keep much more of their capital invested in real estate—generating potential cash flow and appreciation—as opposed to paying a large tax bill.

But if most crowdfunded investments don’t qualify for 1031-exchange treatment, which assets do? The IRS identifies two types of allowable co-ownership structures that work for 1031 exchanges: Delaware Statutory Trusts (DSTs) and Tenants-in-Common (TIC) investments.

DSTs and TICs have been around since the early 2000s and have demonstrated their efficacy as direct real estate ownership vehicles. Mountain Dell Consulting reports that investment in DSTs and TICs reached a post-recession high in 2019, and the trend continues.

Many investors when selling income property utilize a 1031-exchange. What do seasoned real estate investors know that the uninitiated don’t? That deferring taxes on gains allows investments to continue to potentially grow. Public policy allows tax-deferred real property exchanges because they encourage investment in the real estate market and boost economic growth.

The world of private real estate investing has opened up significantly since the JOBS Act, and online crowdfunding has provided many more people with the ability to easily access, evaluate and invest in deals. This is generally a very good thing, but not all co-investment opportunities are created equal since with a typical LLC or LP offering when the property is sold investors will not be able to participate in a 1031-exchange and thus be hit with a tax bill.

Dwight Kay is founder and CEO of Kay Properties, which operates an online marketplace for 1031 exchange properties at kpi1031.com.

Crowdfunding's gained a lot of attention lately. But amid all the scrutiny, one essential fact has eluded many observers. Most crowdfunding offerings are structured as LLCs or LPs. That means they are unable to leverage a very appealing real estate tax benefit: The 1031 like kind exchange, allowing tax to be deferred on property sales with capital gains.

A 1031 exchange is an exchange of like kind business or investment properties in the United States, which permits taxable gains to be deferred on the property that is sold first. From the date that property is sold, the seller has 45 days to pick out a potential property to replace the sold property. From the date the original property changes hands, the seller has 180 days to acquire the replacement property and finalize the exchange.

The gain from a crowdfunded investment may be subject to a 20 to 45 percent tax bite, leaving the investor with far less of the total investment dollars to reinvest. If, however, the same investor had participated in a Delaware Statutory Trust (DST) or Tenants in Common (TIC) on the front end, he or she would have been able to defer 100% of the potential gain and depreciation recapture tax using a 1031 exchange coming out of the initial investment. So says Dwight Kay, CEO and founder of Kay Properties, a DST brokerage and advisory firm with offices in Los Angeles, New York City and Washington, D.C. That would allow the investor to keep much more money invested in real estate, generating greater potential cash flow and appreciation from the next investment, versus forking out for a big tax bill.

Not created equal

There are many reasons to invest in income-generating real estate, with diversification being among the most significant.

"All your eggs aren't in one basket with everything correlated with the stock market – although diversification does not guarantee profits or protect against losses," Kay says. "Once you decide to invest in real estate alongside other people with similar goals, it becomes important to look at the way the asset or assets are held so as not to limit the potential tax savings available."

Most co-investment opportunities are structured as real estate investment trusts (REITs), limited partnerships (LPs) or limited liability companies (LLCs), Kay adds. There's nothing fundamentally wrong with these structures, other than the reality that all co-investment opportunities are not created equal. In a conventional REIT, LLC or LP offering, a sale of the property or portfolio does not generally allow investors to take part in a 1031 exchange. The sale triggers a taxable event, with a resultant tax bill on capital gains and depreciation recapture, Kay reports.

"How do you potentially defer the tax hit?" he asks. "By investing in a DST property to begin with. The IRS allows people to invest out of a DST and into a 1031 replacement property as long as the new property meets basic 1031 qualifying criteria. The result: a gain from the prior investment can be reinvested in an exchange property with tax on capital gains and depreciation recapture deferred."

LOS ANGELES, March 16, 2020 /PRNewswire/ -- The client was a west coast owner of commercial property and was seeking to do a 1031 exchange into DST properties. The client decided to utilize the Kay Properties 1031 DST marketplace at www.kpi1031.com to reinvest his 1031 exchange proceeds due to the specialization and breadth of knowledge that the Kay Properties team provided.

The client's 1031 exchange into DST properties was handled by Kay Properties team members Chay Lapin, Senior Vice President, and Steve Haskell, Vice President.

Dwight Kay, the founder and CEO of Kay Properties, stated, "We are pleased to have helped yet another large 1031 exchange investor complete his 1031 exchange. We have had the pleasure of helping investors complete hundreds of 1031 exchanges over the years and this was another example of a 1031 exchange investor seeking us out for help and guidance on DST 1031 exchange investments."

Kay continued, "We would like to not only thank the client but also the eight different DST 1031 sponsor companies that we placed the client's 1031 capital into their DST offerings. It is our deep relationships with over 25 different DST sponsor companies nationwide that allow us to provide such a turnkey 1031 solution for investors on the www.kpi1031.com marketplace."

Chay Lapin, Senior Vice President of Kay Properties, stated, "Over the past decade, we have seen a growing amount of investors seeking passive investment vehicles with their 1031 exchanges. Clients are tired of the active management headaches and policy changes that have put a heavy burden on landlords within certain areas of the country.

"This particular client was heavily concentrated in one single asset and was looking to transition into becoming a passive investor with their 1031 exchange. The client was looking to diversify out of a single asset class to many asset classes as well as to become geographically diversified*.

"At Kay Properties we have developed a deep understanding and long-term relationships with many DST sponsors to be able to provide potential solutions for investors that are seeking DST opportunities.

"For this client, we were able to successfully create a portfolio that consisted of three long-term net lease investment-grade distribution centers, three net lease medical-related properties, and 11 multifamily assets consisting of over 2,700 units."

Steve Haskell, Vice President of Kay Properties, stated, "There is a growing number of investors searching out Kay Properties to help with their 1031 exchanges from $10-$100M into DST investments. They express to us their need for a specific capability that is highly unique to the DST industry and appropriate for their investor profile. First, this sort of investor desires to partner with a firm that contains a vast selection of 1031 DST solutions which includes both leveraged and debt free offerings from a variety of different 1031 DST exchange sponsor companies so as to create a truly diversified real estate portfolio*. Second, they are searching for specialists with years of experience in the 1031 DST industry that can help them clearly identify the risks and potential benefits of each opportunity. Finally, they want more than just the help of a single financial advisor salesman. This type of client desires the support of a team of experts found at Kay Properties that can oversee each step of the 1031 DST investment process so their exchange is executed smoothly and with minimal delay. Their Kay team includes seasoned senior vice presidents with hundreds of millions of dollars in DST 1031 exchange experience as well as a team of DST due diligence analysts, in house counsel, accounting, underwriters, contract specialists and investor relations.

"Chay and I are grateful to represent the www.kpi1031.com marketplace which is equipped with the resources to provide the care and attention required for both small and large 1031 exchange DST investors."

Kay Properties, one of the largest 1031 exchange marketplaces, has closed an impressive year. The firm raised and placed $230 million in exchange equity with a total funding value of $3 billion. The capital—invested by accredited investors—was placed in millions of square feet of commercial and multifamily properties.

“The fact that the Kay Properties marketplace connects investors with over 25 DST sponsor companies, which allows the investor to view a diverse selection of DST 1031 properties and receive guidance on which DST investments make potential sense for their situation,” Dwight Kay, CEO and founder of Kay Properties, tells GlobeSt.com. “Also, the fact that there is an increasing demand for turnkey, passive 1031 exchange replacement property options as well as increasing desire by high-net-worth investors for alternative investment opportunities such as private real estate that are non-correlated to the public equity markets.”

LOS ANGELES and BALTIMORE, March 15, 2019 (GLOBE NEWSWIRE) -- Kay Properties and Investments, LLC has completed another equity raise on a 100% occupied net lease property in Baltimore, MD.

The Maryland Medical DST offering is a 100% occupied DaVita Dialysis medical clinic located in Baltimore, MD. The property benefits from a long-term net lease corporately guaranteed by DaVita (NYSE:DVA) as well as that the offering is an all cash debt free investment. The DST investment was fully subscribed by multiple high net worth accredited investors throughout the country.