Have you considered Delaware Statutory Trusts as a replacement property for 1031 Exchanges?
A DST is a legal entity created under Delaware statutory law for the purposes of fractional ownership in real estate investment properties.
This turnkey solution is an incredible opportunity for investors who may not have the time, energy, or real estate expertise to find and/ or manage a replacement property.
If you would like to know more my contact information is below.
Lets say I sell a 4 unit building, real property for $2m and I 1031 exchange it into a DST; what happens to my depreciation and gains, are they both off-set and how long does it stay in a DST before I can sell that portion of it and 1031 exchange into another property, say a $4m warehouse.
When it comes to 1031 Exchanges you would be deferring the capital gains indefinitely as long as you continue to do exchanges. As for your depreciation, you carry your basis forward with an exchange. You would still be able to benefit from depreciation should you have some basis left or took on additional leverage via a DST. The typical hold time for a DST is 5-7 years.
There is one exception that will work. It is referred to as a 1031/721 exchange or an upREIT. There are pros and cons with this like any other investment.
if through an upREIT, would that be purchasing real property then upREITing to get partnership units (PUs) ? but the purchase closing and upREIT happen same day? If you convert PU to Shares does that trigger taxable event or when shares sold?
Generally, it will involve the sale of the relinquished property through a regular Forward 1031 Exchange. The replacement property will be a Delaware Statutory Trust (DST) that is specifically designed to be part of the upREIT. The DST is then held for about two years to demonstrate intent to hold for investment. Once the holding period has passed, the entire property with all of the investors in the DST will be contributed into the umbrella partnership of the upREIT (this is the 721 contribution). The investor is now part of the REIT through the umbrella partnership. The one big negative that you need to research before investing is can or will the sponsor sell the property while it is held in the umbrella partnership. If they do and do not structure a 1031 Exchange, it will trigger the investors taxable gain.
