Why 1031 Exchange Diversification Matters

By: Orrin Barrow, Vice President, Kay Properties and Investments, LLC

The Delaware statutory trust was invented so investors would have the ability to utilize their 1031 exchange proceeds to diversify across different 1031 DST sponsor companies, asset classes, submarkets and investment strategies. We here at Kay Properties and Investments have access to a diversified DST 1031 marketplace platform (kpi1031.com) to be able to build well diversified DST portfolios for our clients who are currently in a 1031 exchange, 1033 exchange and for cash investments. 

At Kay Properties we are able to use our considerable resources to get real time updates on how the DST market is performing and we are able to let investors know how each asset class and how each 1031 DST sponsor (the asset manager who manages the DST) is performing.  As an investor, it is not only important to work with a group that has an ample amount of DST offerings and DST sponsors providing diversification available on their platform, but also a group that has deep connections in the 1031 DST industry that allow for investors to potentially benefit from real time market data.

According to US News here are the benefits of diversification:

The benefits of diversification include:

The overarching understanding of diversification applies generally to most investor’s investment philosophy so why as an investor would you not apply the same concept to real estate and your 1031 exchange?  Due to high entry price points for real estate investing, investors typically are concentrating a large portion of their net worth into one or two assets that many times are in the same submarket and belong to the same asset class (for example, an investor that owns a 5 million dollar multifamily building in New York City or an investor that owns a 3 million dollar industrial property in Los Angeles).  

As a stark contrast, the Delaware Statutory Trust allows for you to diversify your 1031 exchange equity amongst multiple DST offerings, multiple DST sponsor companies, multiple asset classes and multiple geographic locations.  For example, instead of owning one 5 million dollar multifamily building in New York City, you could take that 5 million of equity, utilize a tax deferred 1031 exchange and invest into a diversified portfolio of DST offerings consisting of: 1 million into a multifamily DST that has 4 multifamily communities with a total of 1,500 units and diversified amongst 4 distinct geographic locations, 1 million into a debt free DST which owns a self-storage facility, 1 million into a debt free industrial facility subject to a long term net lease with a Fortune 500 investment grade tenant, 1 million into a debt free DST medical facility subject to a long term net lease with an investment grade dialysis provider and lastly 1 million into a debt free multifamily DST.  As shown, the diversification provided with a DST portfolio is tremendous compared to owning just one multifamily property in one location.

To view currently available DST opportunities, with typical minimum investments of 100k, for your upcoming 1031 exchange please register at www.kpi1031.com for free access.

About Kay Properties and www.kpi1031.com 

Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market.  Kay Properties team members collectively have over 115 years of real estate experience, are licensed in all 50 states, and have participated in over 15 Billion of DST 1031 investments.

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

Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. If you are not the intended recipient of this message, any use, dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please immediately notify the sender and permanently delete all copies that you may have. Securities offered through Growth Capital Services, member FINRASIPC, Office of Supervisory Jurisdiction located at 582 Market Street, Suite 300, San Francisco, CA 94104.

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