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1031 Exchange Exlained - Podcast
2008-06-09 17:40:00
Are you interesting in learning about the 1031 Exchange process? Our new podcast series will educate you on the 1031 Exchange process. Listen to our new edition on 1031 Exchange Explained. 1031 Explained - 1031 Exchange Podcast Subscribe to our iTunes 1031 Exchange Podcast Download 1031 Exchange Explained in .wmv Or watch the 1031 Exchange Explained Video If you have any questions that you would like The 1031 Alternatives Group to answer please email them to podcast@1031alternatices.net. 1031 Exchange Explained - Podcast text Welcome to the 1031 Alternatives Group podcast on “The 1031 Solution…a tax deferral strategy for highly appreciated real estate.” If your investment real estate is currently highly appreciated due to years of ownership, and perhaps you have depreciated your property completely. Or maybe, your property is management intensive, you are under or over diversified, and your property is just not providing you enough cash flow….then maybe it is time ...

Triple Net Lease vs TIC: Where should your 1031 money go?
2008-05-19 14:41:00
Listen to the new 1031 Exchange Podcast If you would like your questions to be answered on our next 1031 Exchange Podcast email them to podcast@1031alternatives.net. Thank you for tuning in to the 1031alternatives podcast on 1031 exchange investing. We will be discussing today NNN vs. TIC: Where should your 1031 money go? There’s a lot of investors out there seeking replacement property for their 1031 exchange, but can’t decide on whether to go with a single-tenant NNN (triple net) property or a Tenant In Common (TIC) property. Some of the arguments discussed below make it pretty clear why TICs are becoming more and more popular. TICs are passive income properties that require no daily responsibilities and can free up your time to do other things besides fixing toilets and dealing with tenants. Not to mention, they have the potential to give investors a competitive annual income (paid monthly) which could be partially tax-sheltered due to a new depreciation basis and mor...
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How the 1031 Alternatives Group is Going Green
2008-05-08 14:31:00
1031 Alternatives Group has recognized that a major issue facing real estate owners and occupiers of commercial properties today is the increased attention on measurement, containment and reduction of greenhouse gas emissions. Our investors can feel comfortable knowing that several of the sponsor firms we work with are doing their part to help protect the environment and reduce their impact on global warming. We provide our clients with the opportunity to deal with real estate sponsors that choose to operate with a “Green ” philosophy with some of the following attributes listed below.  - Understanding the real estate issues our clients are facing today in the areas of energy efficiency, sustainability and other smart building practices. - Recognizing the importance of treating the environment with care in all that they do. They believe it is their responsibility to treat natural resources with the greatest respect so that they will be available to future generations the wo...

Demographic Investing. Investing in the Economic and Social Trends that are
2008-04-14 15:45:00
Demographic Investing is a strategy designed to target the regions around the country with the greatest potential for growth and invest in the goods and services that the country’s largest population groups are likely to consume. There are 3 major population groups to take into consideration when discussing Demographic Investing: Seniors – represent about 12% of the US population (roughly 34 million Americans).  These individuals are 65 and older, the parents of the Baby Boomers, and are living much more active and longer lives than the generations in the past.  According to the Society of Certified Senior Advisors, “The population aged 85 and over is currently the fastest growing segment of the older population…this is of great importance because of additional assistance needs and healthcare that is required.” Baby Boomers – represent about 27% of the US population (roughly 78 million Americans) and are born between ...
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Not All TIC Sponsors Are Created Equal
2008-04-08 19:43:00
An investment into a 1031 Exchange – Tenant In Common (TIC) should only be made after careful evaluation of the TIC Sponsor. After all, it is the TIC Sponsor who usually negotiates the purchase of the property, obtains financing, manages the property and distributes income to the investors. There are several key elements to consider before you choose which Sponsor to turn your money over to for your 1031 Exchange replacement property. Experience and Track Record The experience of a TIC Sponsor is extremely important. Typically, a Sponsor with a solid track record and several years of experience can give an investor a greater level of confidence than a new Sponsor just now trying to tap into this growing, competitive market. An investor should also examine the experience of the key personnel of the company to determine how effective these individuals have been in acquiring, managing and eventually selling institutional quality properties in various real estate climates. In most ...
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30 Most Common Things you should know when considering a 1031 Exchange Tena
2008-03-16 22:32:00
As the Tena nt In Common (TIC) industry enters into its sixth year, many investors remain unaware of the success of one of the fastest growing sectors of the U.S. real estate market. Since TICs were revolutionized following official IRS guidance in 2002 (Revenue Procedure 2002-22), the majority of the business and equity raised for these vehicles have been primarily driven by west coast investors. Though the industry has grown tremendously over the past six years, East Coast and Midwest investors are now just beginning to understand and become educated and comfortable with what a TIC is and how they can benefit investors. As an effort to further educate investors on the ins and outs of Tenant In Common Investments, I thought it would be beneficial to list some of the most common factors from the prospective of an experienced TIC broker in which I have come across since entering into the TIC industry from the ground floor and riding the TIC wave from coast to coast. 10 reasons why an...
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Tenant In Common (TIC) Sponsors Face Adversity as the Volatility of US Debt
2008-02-02 00:30:00
Over the past few months the U.S. debt markets have been extremely volatile. We are all aware of the “Sub-Prime” mortgage debacle that has taken our country’s headlines by storm as it pertains to the residential housing market, but many are unaware of what affect that this crisis has played in the commercial real estate market. For clarification, the commercial real estate market is extremely strong at this point and runs an entirely different cycle as residential real estate. Many investors believe the phrase “Real Estate Bubble” refers to real estate in general, when in most cases the so called “bubble” pertains primarily to the U.S. housing market. It is important to realize the differences between both sectors and what the driving factors are that differentiate them. In fact, a recent Wall Street Journal article states that “The national office market, which cratered after the tech bust in 2000, has recovered and is the strongest it has been in five years.” ...
More About: Sponsors , Debt , Face , Common , Adversity

National Association of Realtors (NAR) issues an exemption letter to the Se
2008-01-20 17:19:00
Since 2002, when the IRS issued official guidance in Revenue Procedure 2002-22 on how Tenant In Common investments would qualify for replacement property under Section 1031, the TIC Industry has exploded into a multi-billion dollar a year business. However, ever since 2002, the vast majority of TIC investments have been sold through the securities industry by licensed securities representatives and broker-dealers, not though the traditional means of licensed real estate professionals. Needless to say since 2002, the National Association of Realtors (NAR) and the real estate community has felt left out on these transactions and on October 11, 2007, NAR issued an exemption letter to the SEC on behalf of it’s 1.3 million members. This exemption request to the SEC would grant commercial real estate professionals with “substantial experience” in commercial real estate transactions, exemption from broker-dealer registration requirements of Section 15(a)(1) of the Securities Exchange...
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Costa Financials’ Leading TIC Sponsor, Triple Net Properties Becomes a Pu
2008-01-11 15:37:00
One of Costa Financial Securities – 1031 Alternatives Group’s leading Tenant In Common (TIC) real estate sponsors Triple Net Properties and its parent company NNN Realty Advisors took over 50-year old Grubb & Ellis Company in a reverse merger to become the first publicly traded TIC Corporation. The merger was completed on December 10, 2007 as the result of Grubb & Ellis and NNN Realty Advisor majority shareholder approval. The deal transpired in May when Grubb & Ellis agreed to merge with NNN Realty Advisors through a stock swap deal that gave NNN Realty Advisors’ stockholders 59% interest in the new company. Grubb & Ellis issued 0.88 shares of common stock for each outstanding share of NNN Realty Advisors common stock. The combined company has retained the name Grubb & Ellis Company and relocated its international headquarters from Chicago, IL to Santa Ana, CA. Grubb & Ellis will remain listed on the New York Stock Exchange under the ticker symbol “GBE”. “The merger...
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1031 Proceeds
2008-01-05 15:59:00
The act of selling a property and walking away from the closing table empty handed can be uncomfortable for anyone new to 1031 Exchanges. Remember that the Qualified Intermediary will be responsible for the safety and management of your sales proceeds for up to 180 days, so you should make sure to be informed and comfortable as to how your money will be held. The IRS makes it very clear that the taxpayer cannot have receipt of funds, actual OR constructive, to qualify for tax deferral under §1031, so transparency is key with your 1031 Exchange. Here are some factors to consider and discuss in the planning stages of the transaction. Will my exchange have its own account or will my funds be mingled with other exchanges? Is the account a demand account with sufficient liquidity to fund quick escrow deposits for my replacement properties? How many signers from the intermediary are required to withdraw funds from my exchange account? Will the bank have a copy of my exchange agreemen...

5 Keys to Mastering Your 1031 Exchange
2007-11-28 16:29:00
1.Make decisions based on concrete numbers. Capital gains tax and the motivation to defer those taxes using a 1031 exchange is a complex decision that should be made with as much information as possible. A taxpayer should consider their entire tax scenario, not just the property they are selling, before making a decision to exchange. There may be losses in other business lines to offset the gain on sale and this could decrease the motivation to exchange. Depreciation recapture is often not considered as a tax on sale and could be a motivation to utilize a 1031. Speak to your accountant, compile your true tax situation, and then make decisions based on those numbers. 2.Trust your trusted advisors. There is misinformation about 1031 Exchange s and it is important to know and trust sources of information when researching and planning the transaction. Much of the industry is based on interpretation of tax code from court cases and private letter rulings and requires background knowledge...
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The Turmoil in the Subprime Market is becoming a Bright Light for Apartment
2007-11-27 16:26:00
What do subprime lending, supply and demand, foreclosures, echo boomers, empty nesters, escalated building costs, unaffordable housing, job growth, resort style amenities, immigration and growth markets have in common? They are all factors driving the increased demand for Class A apartment buildings across the United States. With interest rates at record lows in conjunction with the tech bust of the early 2000’s, many investors were convinced to pull their assets from the stock market and funnel these dollars into real estate investments, specifically the U.S. housing market. This trend, combined with lenders willing to loan money to the most risky of borrows (subprime), led to a decreased demand for rental apartments across the country as many of the markets elite renters were now able to own a home rather than rent a unit. Naturally, this real estate frenzy brought in the latest speculators and condo converters seeking to make a quick buck. The problem though is that many mar...
More About: Market , Light , Bright , Subprime

Tenant In Common (TIC) Sponsors Face Adversity as the Volatility of US Debt
2007-10-31 00:49:00
Over the past few months the U.S. debt markets have been extremely volatile. We are all aware of the “Sub-Prime” mortgage debacle that has taken our country’s headlines by storm as it pertains to the residential housing market, but many are unaware of what affect that this crisis has played in the commercial real estate market. For clarification, the commercial real estate market is extremely strong at this point and runs an entirely different cycle as residential real estate. Many investors believe the phrase “Real Estate Bubble” refers to real estate in general, when in most cases the so called “bubble” pertains primarily to the U.S. housing market. It is important to realize the differences between both sectors and what the driving factors are that differentiate them. In fact, a recent Wall Street Journal article states that “The national office market, which cratered after the tech bust in 2000, has recovered and is the strongest it has been in five years.” ...
More About: Sponsors , Debt , Face , Common , Adversity

Director of Costa Financial Securities -1031 Alternatives Group Recently Qu
2007-10-31 00:45:00
Grant Conness, Director of 1031 Alternatives Group of Costa Financial Securities , Inc., was recently quoted in The Wall Street Journal in an article titled “Land Boom to Skirt Credit Woes?” The article discusses the benefits and increased popularity of using the Tenant In Common (TIC) structure to purchase raw land in a credit tightening environment. Though land investments generally do not produce the current income streams that most 1031 Exchange – TIC investors are seeking, they might be a good play “for a younger investor with a longer-term horizon”, as Grant Conness mentions in the article. It may also be a unique opportunity for investors seeking asset class diversification or those in the quest of, “all cash” or no leverage deals. For the investors that may be turned away from land TICs because they lack current income, some sponsors have taken an approach to set up these land TICs with option payments which provide current returns. The sponsor may in turn ...

Every Real Estate Professional Should Consider Teaming Up with a Reputable
2007-09-17 13:58:00
Costa Financial Securities has developed an exclusive program allowing real estate professionals to participate in all the benefits of our 1031/TIC investment program with the aid of our qualified team of professionals. Working with a reputable Tenant-In-Common (TIC) broker allows real estate professionals to acquire new listings and generate more commissions. Deferring taxes encourages clients to sell their properties and build wealth by reinvesting the undiminished gains. With the help of a TIC broker, agents are able to show clients an inventory of institutional grade properties around the country with competitive cash-on-cash returns. Clients may diversify their real estate portfolio geographically and by asset class while avoiding the management headaches, high property taxes, and skyrocketing insurance costs associated with property ownership. TIC investments are a creative way for real estate professionals to motivate would-be-sellers and get them off the side-lines. Exampl...
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The 1031 Exchange transaction works like this:
2007-07-31 14:57:00
Many people have been entering the real estate market as investors for the first time and have been exploring the benefits of tax deferral using a 1031 Exchange .  Speaking with a trusted tax advisor is key to learning the requirements, but many investors have questions about how an exchange will affect their sale and how the process actually works.  Every 1031 Exchange company operates differently, but here is a sample outline of a standard delayed exchange. Prior to Sale: Investor decides to sell, contracts a real estate agent, receives and accepts an offer. Add intent to do an exchange to the sales contract. Contact the qualified intermediary and authorize them to initiate the exchange. The intermediary will request documents from the title/closing company.  These will be used to prepare the exchange agreement. At closing the exchangor will sign the 1031 Exchange documents along with the other closing paperwork. The sales ...
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Combining IRS §121 and §1031 for permanent tax exclusion
2007-07-01 23:32:00
§1031 Exchanges are also called tax-deferred exchanges which means the tax basis from the sales property is not eliminated but carried over to the property that is purchased. While the tax deferral benefits of exchanging are only allowed on investment property, Section §121 of the code has a permanent tax deduction that can be taken on the sale of a primary residence. As long as the taxpayer has lived in the property for a total of two years out of the previous five, they can claim a $250,000 deduction ($500,000 for joint filers) from their income tax. With planning, these two tax strategies can be combined to exclude the capital gains from the sale of investment property. If an exchanger acquires a property, rents it for a number of years, moves into the property as a primary residence for at least 2 years, it is possible to then sell that residence and exclude up to $250,000 of gain ($500,000 if filing jointly) from their taxes. In late 2004, Section §121 was revised ...
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Court rulings on 1031 Exchanges
2007-07-01 23:29:00
We have two sources of guidance for the application of Section 1031 to vacation homes -- a letter ruling and a tax court case. In 1981 the IRS issued a Letter Ruling (Ltr Rul 8103117) that allowed a 1031 exchange on a vacation home that was sold and replaced with another vacation home. The Old Vacation Home that was sold had not been rented for the six or seven years prior to the exchange, and had been held for both "personal enjoyment" and as a "sound real estate investment." The New Vacation Home that was purchased was also intended to be held for the same personal enjoyment and investment intent. All of these questions appear to have been answered in a recent U.S. Tax Court case (Rivera v. Commissioner). This case is significant because the U.S. Tax Court is, if you will, "The Supreme Court" of tax law, so the weight of this decision is heavy. (Although that being said, this is a Summary Opinion and carries only persuasive support -- albeit a strong one -- and not the actual p...

TIC Industry Statistics: Q1 2007
2007-07-01 23:05:00
The amount of investor equity placed in Tenant In Common properties rose 13% in 2006 to $3.6 billion of equity placed, and the growth is projected to continue in 2007. The first quarter of 2007 reported $900 million of equity placed with a 2007 forecast of $4.5 billion for the industry as a whole. As knowledge of TIC’s has grown, the number of sponsors packaging the investments has increased, which will bring more diversification options to investors both in property classification and geographic location. Quarter one of 2007, for example, deals closed in 22 different states across the country. The top states in number of deals closed Q1 of 2007 were: Texas-10, Arizona-5, Georgia, California and Illinois each closed 4.
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Know Your Qualified Intermediary - 1031 Exchanges
2007-06-24 23:26:00
News of two exchange companies mishandling client 1031 funds has been in the news recently and has caused concern among users of the popular tax deferral strategy. The negative actions of a few are overshadowing the success and responsible approach of the many. It is important to note that 1031 Exchanges have been around for over 85 years and were intentionally established by the IRS with clear guidelines allowing taxpayers to defer gain on their investments. Although not representative of the industry as a whole, these cases do highlight the importance of researching the company you choose to process your 1031 Exchange. As with any important decision, know whom you are choosing to do business with. Some questions to ask when researching a potential 1031 company: Will my money be held with a large bank with online viewing of my funds Is the money in a segregated account or mingled with other funds Do disbursements of exchange proceeds require more than one ...
More About: Qualified Intermediary , Intermedi

Combining IRS 121 and §031 for permanent tax exclusion
2007-06-24 23:20:00
1031 Exchanges are also called tax-deferred exchanges which means the tax basis from the sales property is not eliminated but carried over to the property that is purchased. While the tax deferral benefits of exchanging are only allowed on investment property, Section §121 of the code has a permanent tax deduction that can be taken on the sale of a primary residence. As long as the taxpayer has lived in the property for a total of two years out of the previous five, they can claim a $250,000 deduction ($500,000 for joint filers) from their income tax. With planning, these two tax strategies can be combined to exclude the capital gains from the sale of investment property. If an exchanger acquires a property, rents it for a number of years, moves into the property as a primary residence for at least 2 years, it is possible to then sell that residence and exclude up to $250,000 of gain ($500,000 if filing jointly) from their taxes. In late 2004, Section §121 was revised to a...
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1031 Exchange Sample Tax Deferal Form
2007-05-11 06:01:00
  Sample tax deferral from a 1031 Exchange   Here is an example of a potential real life transaction illustrating the tax savings of doing a 1031 Tax Deferred Exchange.  An income producing property originally purchased for $500,000 and held for a few years.  Over that time improvements of $25,000 were made and $100,00 of depreciation was taken.  The property is listed for $1million and is sold.  The fees for the real estate agent commission, title and legal work and other sales expenses totaled $80,000.  • Purchase Price $500,000 • Capital Improvements $25,000 • Depreciation ($100,000) • Sale Price $1,000,000 • Sale Expenses $80,000   Determine the Basis Original Purchase Price $500,000 PLUS Capital Improvements (+) 25,000 LESS Depreciation (-) 100,000 Adjusted Basis $425,000   Gain Sale Price $1,000,000 LESS Expense of Sale (-) 80,000 Net Sale Price $920,000 LESS Adjusted Basis (-) $425,000 ...
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Are Tenant In Common TIC investments real estate or securities?
2007-05-03 23:50:00
While Tenant In Common investments qualify as real estate for1031 exchange purposes, they are primarily sold by Securities Investment Professionals.  Since 2002 there has been a constant debate about whether TICs should be marketed as Securities or Real Estate .  While roughly 95% of the TIC industry believes TICs should be sold as Securities, the debate continues.  The main platform that the Securities side stands on is “full disclosure” to the investor.  By entering into a Securitized TIC investment, investors receive the distinct advantage of reviewing package due diligence materials in the form of a Private Placement Memorandum.  This is in most cases, a duty and expense that the investor would otherwise have to undertake on their own when acquiring other forms of real estate. Here are some bullets supporting the opinion that Tenant In Common investments are indeed securities and should be marketed as such. The court case SEC vs. W.J. Howey Co. 194...
More About: Real Estate

1031/TIC investments - Foreign investors can maximize their Profits
2007-04-30 18:09:00
Despite the recent housing turndown foreign investors still consider the US market quite stable and are buying properties at a record pace.  The combination of a buyers market and the weak US dollar has created a surge in overseas investors that has helped soften the market downturn in some hard hit states like Florida.  These investors have a huge opportunity with combination of 1031 Exchanges and Tenant In Common (TIC) investment properties.  The primary benefit of 1031 exchanges is the deferral of capital gains tax and depreciation recapture on the sale of investment property.  A less known tax consequence for foreign investors is the addition of a foreign investor, or FIRPTA, withholding of 10% applied to all properties sold in the United States by nonresident individuals or corporations.  The good news is that the FIRPTA tax is also deferrable under section 1031 and when combined with the capital gain and recapture taxes can result in very significant ...
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