Real Estate

Tax Deferral Strategies

Examine our web site and three things stand out. The first is that we have an extensive educational blog through story-telling. The second is that we embrace the combination of adaptive and smart beta investing. The third is that we have an entire tab dedicated to real estate. That’s highly unusual. The question is why? Let us tell you a story.

A few years ago, a client decided it was time to sell one of their properties. It was part of a general estate plan designed to provide heirs with liquidity and to eliminate hard to sell or complicated holdings. But there was a problem. The property had been held for over 30 years and when sold, would have triggered a $800,000 tax. The proceeds from the $2.5 MM sale would only leave $1.7MM.

Selling property is not uncommon but a tax of this magnitude was. Traditionally we would have advised our client to proceed with the sale and invest the remainder in a securitized portfolio of stocks, bonds and cash instruments. This was not uncommon since we dealt with a number of clients that were primarily real estate investors and utilized our services as an adjunct. But as fate would have it, we were having a casual conversation with another client that indicated that we might want to explore an alternative solution.

He indicated that a 1031 exchange might be appropriate and that there was a special situation where an investor could 1031 a real property into a securitized property without paying taxes currently and potentially avoiding taxes altogether. We had never heard of it and did some research. This securitized property is called a DST and stands for Delaware Statutory Trust. You can learn more about them by visiting our educational site. 

The story has a happy ending. Our client was able to sell the property and avoid taxes by investing in a portfolio of institutional quality DSTs that provide a monthly income almost twice as much as had they gone the traditional “sell the real estate give it to the advisor/bank to invest” route. Once we were witness to this success, it was only a matter of time before we wanted to replicate this solution.

Since then, we have developed a process that is true to our fiduciary roots. Our fee-only consulting practice in 1031 exchanges emphasizes transparency and no conflict of interest. It’s important that a client understand that if we recommend one DST over another that we have no financial incentive. Because we’re fee-only fiduciaries, it’s our legal obligation to recommend the best investments – rather than steer clients towards deals with the highest commissions. If you’d like to know more about our unique billing structure, visit the contact us page to learn more about real estate investing and tax deferral strategies and we’ll be happy to get back to you.

Delaware Statutory Trusts
DSTs are a securitized unitized real estate investment available to accredited investors only via private placement that own a property or properties that can be used in a 1031 exchange. Translation – it’s a way to defer taxes on the sale of highly appreciated commercial or investment real estate. Please understand, DSTs aren’t for everyone. They’re really for investors who are looking to unwind their real estate holdings and responsibilities without paying a big tax bill. If you’re still looking to grow your real estate via leverage and looking for double-digit rate of return investments, please keep doing what you’re doing and we’ll be here in 20 years, waiting patiently.

There are a number of sites out there that talk about DSTs and 1031 exchanges. Please familiarize yourself with them and when it comes time to purchase, purchase from someone who’s a Registered Investment Advisor and investment fiduciary, like Sera Capital – who will waive 100% of all commissions and never steer you towards investments that could compromise your retirement. To learn more about DSTs, please visit our educational website – http://my1031income.com to learn more or contact us directly.

Opportunity Zones
Opportunity Zones and Opportunity Zones funds are all the rage and it seems like every local developer is getting into the opportunity zone fund space. There are roughly 8800 Opportunity Zones in the country, but only about a dozen worth examining if rate of return matters.

If you’ve worked hard to grow your business or have highly appreciated stock, or art or anything that’s eligible for an opportunity zone, you’re going to want to partner with the largest, most reputable developers in the country and we can help with that. Under no circumstances do we recommend that anyone roll 100% of the proceeds from the sale of their business, etc, into an Opportunity Zone – this isn’t investment advice, it’s common sense. If you are looking for further information on opportunity zones and opportunity zone funds, please contact us and we will be happy to get back to you personally.
if you are looking for further information, please contact us and we’ll be happy to get back to you personally.

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