Are DST & TIC Investments Right For Me?
Download the Free DST Guidebook
When we here at Realized use the terms “fractional 1031 properties” or “fractional 1031 investments,” we are NOT referring to timeshares, shared vacation home arrangements or other “fractional interest” properties. For Realized, “fractional 1031 investments” refers to co-ownership in one or more properties by multiple 1031 exchange investors. Two ownership structures have been approved by the IRS for Fractional 1031 Investments, the Delaware Statutory Trusts (DST) and Tenants-in-Common (TIC). Realized coined the term Replacement Property Interests (RPI)™, which has the same meaning.
The concept of a Fractional 1031 Investment is analogous to a group of investors pooling their capital to purchase and own property through a limited partnership or Limited Liability Company (LLC). However, Fractional 1031 Replacement Property Investments use either a DST or TIC structure to qualify for 1031 exchanges, whereas partnerships and LLC do not.
Now that the distinction is clear, why would an 1031 investor want to invest alongside other exchange investors versus owning a property on their own? Fractional 1031 Investments are an attractive option for many 1031 investors for the following reasons:
Speed and Ease. 1031 investors are often racing against the clock to meet the IRS timeframe requirements of an exchange. Fractional 1031 Investments are Pre-Packaged, meaning the DST or TIC already owns the property and the 1031 investor is simply purchasing ownership interests in that DST or TIC.
Large, High-Value Properties. The DST or TIC usually owns properties that are otherwise beyond the reach of the individual investor’s exchange. For example, it could be a 300-unit apartment building or medical office complex.
No Landlord Burden. Fractional 1031 Replacement Properties are typically leased, managed and maintained by seasoned real estate operators that Pre-Packages the opportunity for the 1031 investors. This can offer the investor a passive income stream free from any on-going landlord duties.
Stable Income. Fractional 1031 Replacement Properties are typically “stabilized” assets with established operating histories, allowing the investor to more easily evaluate both the potential return and the risks. Investors are usually offered a monthly or quarterly preferred return by the Sponsor.
Diversification. Investors can efficiently exchange into multiple Fractional 1031 Replacement Properties, allowing them to diversify by type of property and location. This is attractive for many investors who would prefer not to have all of the 1031 equity invested in a single property.
While some of the requirements of Fractional 1031 Investments sound a bit technical, investing in them is relatively straightforward. Often investors are able to complete their exchange in as little as a week, after they’ve identified the DST or TIC they want to reinvest in.
To learn more, download our Investor's Guidebook to Fractional 1031 Replacement Properties. Or, explore a variety of current DST offerings side by side on the the Realized Marketplace.
Download the Free DST Guidebook
Realized, 109 E 10th St, Suite 300, Austin, TX, 78701, United States
© 2019 Realized Holdings, Inc.
Realized does not make investment recommendations, and no communication through this website or in any other medium should be construed as investment advice, nor does it make any recommendations regarding the appropriateness of particular opportunities for any investor. Realized does not provide tax or legal advice and no communication through this website or in any other medium should be construed as tax or legal advice. All prospective investors must certify that they are accredited investors, suitable for this type of illiquid investment, and must acknowledge that they have received and read all investment terms and conditions. Many investment opportunities posted on this website are “private placements” of securities made pursuant to an exemption from registration and have not been registered with Securities and Exchange Commission (“SEC”) or any state securities regulator. Securities offered on this website are not publicly traded, are subject to holding period requirements, and are intended for investors who do not need a liquid investment. Securities offered on this website are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Realized, WealthForge or their respective affiliates, and MAY lose value. Realized makes no representations or warranties as to the suitability of any investment opportunity posted on this website as eligible like-kind property in connection with tax deferred exchanges under IRC §1031. Neither the SEC nor any federal or state securities commission or regulatory authority has recommended or approved any investment opportunity presented on the website or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.
Any financial projections or pro-forma returns shown on the website are illustrative examples only, and there can be no assurance that any such projections or valuations provided are accurate or in agreement with market or industry valuations. Any investment representation or information contained herein has been secured from sources Realized believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefor. Offers to sell, or the solicitations of offers to buy, any security can only be made through official offering documents that contain important information about risks, fees and expenses. Investors should conduct their own due diligence, not rely on the financial assumptions or estimates displayed on this website, and are encouraged to consult with a financial advisor, attorney, accountant, and any other professional that can help you to understand and assess the risks associated with any investment opportunity. Fluctuations in the value of the assets that are the subject of any investment are to be expected. Tenant vacancies, competition from similar properties, or potential environmental conditions at the property may negatively impact rents and cash flows. Additional risks exist due to a variety of factors, including, but not limited to, leverage, market risks, business risks, management, adverse tax consequences, and such other risks more particularly described in the related offering materials. There is a potential for loss of part or ALL of the investment capital, and each investor should understand that all capital invested may be lost. Investors should only consider these investments if they have no need for liquidity and can bear the risk of losing their entire investment. Check the background of this firm on FINRA's BrokerCheck.
*Past performance is not indicative of future performance.