#8. Limited Legal Liability
For many landlords, there is no shield of liability protection between them and their rental property. Even for those individual owners who have an LLC or other business entity, many find themselves open to “piercing the corporate veil.” And if a landlord does not place each rental into a separate LLC, all properties may be at risk to the extent that liability exceeds insurance coverage. DST investors, on the other hand, enjoy legal protection from personal liability related to property litigation
(beyond invested capital). In a typical DST program there is a master tenant, property manager, trust, and large insurance policy between a property and the investors. Upon exchanging into a passive replacement program, investors can enjoy owning institutional real estate without worrying about the threat of liability. Sadly, the same cannot be said about conventional, directly- owned real estate.
#9. Fast, Simple, and Transparent Investment Process
A general deterrent to §1031 exchanges, particularly for mom-and-pop investors, is the specter of conducting not one but multiple real estate transactions, including all of the paperwork (scores of initials and signatures, meetings with notaries, public filings, tax documents, etc.). Although one cannot avoid the traditional process to sell a rental property, exchangers certainly can have a better experience with the replacement:
• No escrow period • No Notary Public
Unlike typical real estate “broker packages,” investors receive a Private Placement Memorandum (PPM) that is usually 200-300 pages long, delineating all material details, risks and financial projections. Among the top program sponsors, these PPMs are subject to due-diligence review by law firms, third-party consultants, independent broker-dealers and individual financial professionals. Before buying, investors in 1031 passive replacement programs can learn more about the property than in a typical transaction. Because passive §1031 strategies have evolved into a robust market, there are multiple potential solutions available at any time. Most programs are fully subscribed in a matter of days, so the “menu” of available options is constantly changing. With the right consulting team, landlords can confidently pursue potential replacement strategies from any state in the country, no matter when they sell their apartment building or other rental property.
• Funds invested shortly after subscription • DocuSign or other digital signature platform may be available—no wet signature required • Streamlined application process is possible in many instances $500,000, we have found some sponsors are able to be flexible with former landlords who may be able to invest lesser investment amounts into a passive replacement program. 11 Need to re-invest precisely $867,539 of equity? No problem. This is in stark contrast to traditional real estate, where a desired replacement property rarely will be the same exact price as the relinquished property.
#10. Customizable, Flexible Investments into an Array of Potential Strategies Subject to a typical minimum investment up to
RICHARD D. GANN, JD Managing Partner 1031 Capital Solutions (800) 445-5908 1031CapitalSolutions.com
Richard (Rick) Gann is an attorney, licensed real-estate broker, and general securities principal specializing in 1031 exchange solutions and he is co-author of the book “How to Retire from Being a Landlord”.
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