| This reading, as you see from the subject, is | | | | |
| for you as a real estate investor as well as | | | | Your replacement must comply with at least |
| brokers, agents and real estate professionals | | | | one of the following. |
| who desire to create long term cash flow and | | | | |
| income out of your present or soon acquired | | | | 1. You as the owner may identify, regardless |
| equity in residential real estate property | | | | of their property value, up to three |
| you own. As you will see, in a changing world | | | | properties. This is The Three Property Rule. |
| and a fluxing real estate market on a | | | | |
| national level with the decreasing value of | | | | 2. You may also choose the 200% of Fair |
| single home residential homes, there are | | | | Market Rule which allows you the exchanger to |
| alternate ways and ever tried and true | | | | identify more than three potential |
| methods of increasing your income as you | | | | replacement properties. These must have a |
| diversify in you techniques and | | | | total fair market value not exceeding 200% of |
| marketability. | | | | the final sales price of the relinquished |
| | | | property. |
| Let's delay no further, and allow us to | | | | |
| explain to you the benefits of the 1031 | | | | The requirements to fully defer are: You must |
| exchange and Triple Net Commercial | | | | reinvest 100% of proceeds. You as the |
| Properties. If you are a pre-qualified real | | | | investor must acquire newly acquired property |
| estate investor, for instance, and your aim | | | | of same or greater debt. During the time |
| is to set up favorable ways to organize you | | | | between your old property's sale and purchase |
| estate, in turn benefit your family, and | | | | of your new property, you cannot touch the |
| generate a positive cash flow along with no | | | | money. |
| property management responsibilities, along | | | | |
| with eliminating paying capital gain taxes. | | | | In triple Net Lease your tenants are required |
| Read along and make note of the information | | | | to pay all insurance, maintenance and taxes. |
| you will be learning, or refreshing yourself | | | | Also included as the responsibilities of the |
| in memory. | | | | tenant are all regular expenses of ownership, |
| | | | which leaves day to day management to the |
| A solution many real estate investors and | | | | tenant, not the owner. |
| owners have found to beneficial to their | | | | |
| future planning and next generation | | | | 15-30 years are the norm for most commercial |
| inheritance beneficiaries is the 1031 | | | | property Triple Net Leases. Rental payment |
| exchange. Capital gains taxes are deferred on | | | | continues throughout the term of lease. |
| your sale of your property. You may also | | | | Credit rating of tenant is very important. |
| re-invest your equity from the sale of your | | | | |
| investment property and place the equity as a | | | | Now on the Triple Net Lease you have many |
| re-investment into the TIC investment | | | | advantages on you 1031 investment property. |
| property, which is passive. If you own a TIC, | | | | You as the owner are relieved from the daily |
| you have less interest than a commercial | | | | management issues. Corporate tenants pay |
| grade property. You'll have no daily hassle | | | | potential steady income. Mortgage loans at |
| of trash, turnover, tenants or toilets, and | | | | favorable rates are possible for you with |
| therefore enjoy the benefits thereof. One | | | | long term leases to corporate tenants having |
| thing to keep in mind, naturally, is that you | | | | credit ratings. Appreciated residual values |
| will still face fluctuations in the real | | | | because of middle income areas with desirable |
| estate market, an inherent risk as well as | | | | traffic patterns, are another advantage. |
| expenses associated with speculative | | | | |
| investment strategies. | | | | Many companies desire to lease their business |
| | | | property from owners such as you. This allows |
| If you wish to allow for more alternatives | | | | them freedom to occupying companies to |
| for your heirs, this can simplify your estate | | | | customize their environment without |
| for yourself and them. One heir can keep a | | | | committing to ownership. |
| fractional interest while another heir can | | | | |
| liquidate their fractional share of your | | | | 1031 exchange investors, such as yourself |
| estate. | | | | potentially, have since the 1990's reinvested |
| | | | equity into triple net lease investment |
| 1031 exchange is not an avoidance of tax, but | | | | properties structured as Tenancy-in-Common |
| actually a rollover of equity of like | | | | (TIC). There are advantages to this such as |
| properties. In the IRC Section 1031 the | | | | the wide selection of qualified exchange 1031 |
| exchange of business use or investment | | | | triple net properties, diversification, real |
| property of any kind for any other business | | | | estate companies typically locate these |
| use or investment property the recognition is | | | | properties, you can potentially invest in |
| that there is no gain or loss. When you meet | | | | institutional grade properties as the |
| the 1031 tax exchange criteria in the 1031 | | | | exchanger, you may benefit from non-recource |
| tax exchange, you have a deferred tax | | | | debt, and the range of opportunities on these |
| projected until sometime in the future tense, | | | | investments can range from as little as 50 |
| most times until the time of the selling of | | | | thousand on up to several million dollars for |
| your newly acquired property. This deferral | | | | you as an investor. |
| can continue for you through any number of | | | | |
| exchanges up to the point when tax liability | | | | So you see, as a prudent real estate |
| passes into your estate, as this is an | | | | investor, there is much to consider in the |
| individually held investment. | | | | way of trading your current Residential real |
| | | | estate that has equity into some commercial |
| There are some time restraints for the | | | | real estate providing stable long-term cash |
| exchange. As it is called, the Acquisition | | | | flow. The Triple Net Commercial Property |
| Period, 180 days is the maximum number of | | | | gives you the provision of long term |
| days allowed from the closing of relinquished | | | | professional tenants. You can pass on all |
| property or until the due date of that | | | | operating costs to your tenants. Owners don't |
| current years tax return, whichever of the | | | | have the daily hassle and headache of |
| two comes first, in order to acquire your | | | | management. Also remember your taxes on |
| replacement property. You, the exchanger, | | | | realized gains can be deferred when you move |
| must first identify the property within the | | | | equity from Residential into Triple Net |
| first 45 days. This is the Identification | | | | Commercial Properties. |
| Period, identifying the replacement property. | | | | |