1031 Exchange And Joint Leasing: Finding The Right Consultant To Achieve ICT Investment Objectives
A long-standing section of the Federal Tax Code, Section 1031, allows real estate investors to sell properties that have been held for investment purposes and to defer the recovery of capital gains and depreciation taxes if they purchase exchange property. "similar" of equal or greater value and reinvest all its capital. Since the mid-1990s, many investors have experienced the benefit of reinvesting their capital in interest in real estate investments structured as joint leasing (ICT). TIC owners have an undivided fractional ownership interest in real estate investment evidenced by a trust deed.
TIC, also known as Co-Ownership of Real Estate (CORE), allows an investor to participate in the ownership of professionally managed institutional-grade investment properties. Investor capital can be diversified across different properties, geographic markets and real estate companies, potentially increasing both the value and safety of the real estate investment. TIC / CORE investments are designed to offer capital conservation, predictable cash flow and long-term appreciation in institutional-quality real estate investment assets that benefit from greater economies of scale.
With its features and benefits, TIC / CORE is an increasingly popular 1031 exchange option for many real estate investors. However, 1031 exchanges and TIC / CORE transactions are very complicated, and tax and legal issues top the list of potential difficulties. Therefore, it is essential that investors know what to look for in a quality advisor. Securities law requires financial advisors to have an appropriate license to consult with clients regarding ICT / CORE transactions and other real estate investment interests. Financial advisors must be licensed on series 7 and 63 securities to qualify as experienced and comprehensive advisors in the investment process. It is essential that they have experience in commercial real estate, as well as an understanding of the client's personal investment goals and suitability issues.
But perhaps the most important component to look for in an ICT financial advisor is his or her intimate, trustworthy and deeply rooted relationships with major real estate companies. This attribute is critical to your ability to deliver the best opportunities to your customers. There are nearly 80 real estate companies in the United States.
States that are already involved or are considering to be involved in the ICT / CORE sector as real estate service providers. As in any industry, these 80 companies represent varying degrees of knowledge, experience and quality. To achieve the maximum potential for a client, a financial advisor must have constant access to ten percent of these companies to provide their clients with access to the best properties available. Obviously, a new financial advisor with little or no industry experience or knowledge may not have access to major real estate providers, as these providers prefer to work with expert advisors who specialize in this unique segment of the market.
Investors should also be aware of how their financial advisor behaves, looking for a history of successfully completed transactions. A long and proven track record indicates that a financial advisor is an experienced professional. An investor wants such an advisor in their corner who asks all the right questions, provides appropriate and appropriate recommendations, understands the nuances of successfully completing TIC / CORE transactions, and provides answers to all tax and legal questions.
When considering a 1031 exchange or TIC / CORE investment, investors should ask the following specific questions to the financial advisor:
* What percentage of your business is related to the 1031 exchange and / or TIC / CORE? * How many investors have you consulted who have invested in TIC / CORE structured properties this year? How many last year? * How long have 1031 and TIC / CORE exchanges been the focus of your investment recommendations? * Do you have the appropriate licenses to complete this transaction (Series 7, Series 63 title licenses)? * With which real estate agencies do you work most closely?
As customer demand continues to drive this segment of the real estate market, the emphasis on quality - quality advice, quality property and quality transactions - will become increasingly important. Part of the qualitative process is to ensure that financial advisors representing a client provide appropriate recommendations for that client based on the client's best interest and not on the basis of any "bias". A final issue that needs to be addressed is that it is not unusual for "baseline" compensation to be paid between the referring parties. This practice is illegal and constitutes a complete violation of ethics. Therefore, if any form of compensation changes hands - whether disclosed or not - between financial planners and qualified intermediaries,real estate companies or other unlicensed entities resulting from an exchange transaction, a crime may have occurred.
In short, investors should take the time to identify a trusted advisor who will not only provide acceptable answers to the above questions, but will also have the necessary relationships to guide their clients towards the right investment. It is important to remember that companies or individuals involved in the recommendation, offer or sale of 1031 TIC / CORE investments must be licensed by a stockbroker, SEC, NASD, and government securities regulators in each state in which it operates. the society. or the individual. and where the customer resides. Any "unlicensed" company or individual involved in recommending, offering or selling these investments is in direct violation of federal and state securities laws.
Co-ownership is the fastest growing option for 1031 exchange investors looking for suitable replacement property. With proper structure and presentation, these investments can also create new listing opportunities for real estate agents, while meeting the IRS 'similar' investment property requirements and SEC and NASD securities regulations. The benefits of co-ownership of institutional-grade properties are clear and compelling. When exploring co-ownership, smart investors should turn to industry experts to guide them through the property replacement process. Indeed, it is the wise investor who is aware of his or her long-term goals who seeks expert guidance to chart his course, thus turning ICT / CORE investment opportunities into reality.
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