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Single-Family Rental REITs: What They Are and How They Work
Due to rising property costs and decreased buying power, many Americans are now choosing to rent instead of owning a home. This shift in the housing market has led to the emergence of single-family rental real estate investment trusts, also known as SFR REITs. How do these investment vehicles work? What are the benefits and risks investors must consider? Below, Realized 1031 has shared a guide to help answer these questions. Keep reading to learn more.
What Is The Main Objective Of Investing In Equity REITs?
Equity REITs (Real Estate Investment Trusts), which own and manage income-generating properties, appeal to investors looking to invest in income-producing properties, mainly in commercial real estate.
REITs vs. DPPs: Similarities and Differences
Many real estate investment strategies are available to meet various needs, risk profiles, and investment goals. Two common approaches are real estate investment trusts (REITs) and direct participation programs (DPPs). Both strategies allow real estate exposure and potential income generation but have different structures, tax treatment, and risks.
An Explanation of UPREITS and Dividend Payments
If you’re an investor interested in moving from direct to passive real estate ownership, contributing your property to a real estate investment trust (REIT) using the Section 721 exchange could be a viable tax-advantage strategy to help defer capital gains taxes.
Decoding Financial Statements When Exchanging DSTs into REIT Shares via Section 721
There are many ways to be involved with real estate ownership. There is direct ownership, which involves hands-on management and decision-making. Then there is passive ownership, including Delaware Statutory Trusts (DSTs) or real estate investment trusts (REITs).
UPREITs and Legal Aspects
When executed properly, Umbrella Partnership Real Estate Investment Trusts (UPREITs) can provide a tax-advantaged diversification approach or exit strategy if you’re done with active property ownership. However, the process can be intricate and involves legal and tax issues.
Using Section 721 to Dispose of Commercial Real Estate
Owning and managing commercial real estate (CRE) properties requires a great deal of time, money, and know-how. If you’re a CRE owner or investor who wants to move on, you could sell your properties. However, property value appreciation can mean capital gains taxes.
The Limitations of REIT Investments
A real estate investment trust (REIT) is a company that buys, sells, operates, and finances income-producing properties. REITs raise capital to acquire and manage these properties by selling units or shares to investors. Income generated by the owned properties through rent and property appreciation is distributed to investors as dividends or cash flow.
What to Know Before Working With a UPREIT Sponsor
If you own appreciated-value investment real estate, an Umbrella Partnership Real Estate Investment Trust (UPREIT) can be a good tax-advantaged option. Available through the Internal Revenue Code (IRC) Section 721, a UPREIT transaction allows you to trade your real estate assets in exchange for Operating Partnership (OP) units in a real estate investment trust (REIT). Those units can be exchanged for REIT shares or cash at a later date.
The Impact Of UPREITs On Real Estate Developers
In the past, real estate developers earned money by collecting rent on completed properties or selling them. In recent years, 26 U.S. Code § 721—“Nonrecognition of Gain or Loss Contribution”—has offered property owners and developers different real estate financing methods.
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