Real Estate Investment and Tax Letter May 2016
Exchanging your 1031into a REIT The IRS doesn't categorize REIT shares as "like-kind" assets, thus precluding a direct exchange. However, investors can pivot towards a Delaware Statutory Trust (DST), which the IRS recognizes as a "like-kind" property. Under IRC Revenue Ruling 2004-86, acquiring a DST interest is the initial step. Some DSTs subsequently integrate into a REIT as part of their operational strategy. Through this evolution, investors can opt for a section 721 exchange, transitioning their DST interests into shares of the REIT's operating partnership (OP Units) on a tax-deferred basis. Typically, these OP Units hold the potential for one-for-one conversion into the REIT's common stock. It's important to note that not all DSTs follow this trajectory, and even if they do, the certainty of a UPREIT/721 exchange remains uncertain. Report the Exchange on Form 8824
Always ask your financial advisor if this or any idea is appropriate for your investment plans.
Finding the property with the right things wrong There There are 5 Levels of Improvement that will increase the ROI on your property. To find “the house with the right things wrong,” This strategy allows for a high return on investment (ROI) through sweat equity, rather than expensive repairs. This type of property is often called a “fixer-upper with good bones”.
1. The right things wrong (cosmetic issues) Focus on properties where your labor and budget will have the most visible and valuable impact. These are the problems that scare off most buyers, but are relatively inexpensive to fix.
2. Outdated decor: “Unfortunate tile and terrible paint colors are your best friends,” according to designer Lauren Liess. Dated bathrooms and kitchens may look bad but can be a huge source of equity if the layout is functional.
3. Poor curb appeal: The first impression a home makes can significantly affect its value. Cosmetic issues with the exterior, such as overgrown landscaping, a dirty exterior, or a dated front door, can be improved cheaply and deliver a high ROI.
4. Worn surfaces: Worn or dirty flooring, scuffed paint, and aging kitchen cabinet hardware are relatively minor fixes. Refinishing existing hardwood floors is a budget-friendly option that can offer a fresh, clean look.
5. Chopped-up floor plan: For older homes, look for a layout that can be opened up to feel more spacious and modern. However, be cautious if walls are
6. And one more mistake - Green or orange rugs, appliances, wallpaper
Always ask your financial advisor if this or any idea is appropriate for your investment plans.