Realized Blog

Realized is fortunate to have Mark Roderick as its guest contributor for this week’s blog. Mark is a well-respected, securities attorney with Flaster/Greenberg. He is also one of the thought leaders in the United States on crowdfunding, and the author of the Crowdfunding Attorney Blog. 

There is no surprise that real estate investing stands as an attractive opportunity for individuals trying to grow their wealth. Real estate investments cater to diversification¹, while allowing for the potential of steady risk-adjusted returns backed by real property. These potential returns that investors look for don’t exist without the onset of a degree of risk, however, making these kind of investments not all rainbows and butterflies - some investment objectives may vary. Whether it derives itself from the market, tenant, or even financing of the property, risk is assumed in a variety of ways and differs property type to property type.

The retail industry is all around us. Whether it is helping us put food on the table, clothes on our backs, or delivering us a common product, we rely on retail to provide us with what we need, when we need it. From local shopping centers to regional malls, retail properties are characterized by having the sole purpose of selling and delivering consumer goods and services. Although in a growing technological world where e-commerce has established itself as a threat to the retail industry, online retailers have still been establishing themselves in physical stores, only increasing the presence of the retail sector in commercial real estate. Offering both unique investment structures and the potential for higher than average risk-adjusted returns, retail has established itself as an attractive opportunity for real estate investors.

What is the first thing that comes to mind with the words “off-campus student housing?”

Introduction

A nice benefit of real estate investment is all the potential tax benefits. A well-thought-out real estate strategy can generate tax-sheltered or even tax-free cash flow for years. However, as any seasoned real estate investor will tell you, there are times when real estate investments generate losses whether from the aggressive use of allowed depreciation (good) or some vacancy or rental loss (bad). Common sense might dictate that those losses could be deducted in the year they occur, but because real estate income losses are always subject to the Passive Activity Loss (“PAL”) rules of the IRS, this is not always the case.

We discuss property in great deal in our blog posts. We talk about property that can be exchanged for other property, that can be held for investment, or that can be bought or sold.

As you may have guessed from our company’s name, here at Realized 1031, we help investors defer their capital gains and depreciation recapture liabilities that arise from the sale of an investment property(ies). This is done through a provision in tax code known as a 1031 exchange and here at Realized 1031, this is typically accomplished via investment in one or more 1031 exchange-qualified Delaware Statutory Trust (DST) offerings.  

Mention “individual retirement account,” and what might come to mind is “tax-deferred contributions.” You add cash, or cash equivalents, to your individual retirement account (IRA), to build value over time. An account administrator uses those tax-deferred contributions to buy stocks, bonds, funds, or other securities. When you retire, you have access both to the original contributions, and investment returns.

Our previous blogs on 1031 Exchanges focus mostly on real property, or real estate. However, the Internal Revenue Code (IRC) 1031 also covers what is dubbed “personal property.” In other words, property held for investment and/or business purposes, but that isn’t real estate, is also eligible for 1031 exchanges - at least for the current time.