[Update]: We've recently launched a directory site www.1031reviews.com that provides a more comprehensive list of 1031 registered reps, QIDs, and sponsors by state and city. We're also adding reviews and ratings, so you can vet folks before working with them.
Joan Biro Standard & Poor's joan_biro@sandp.com (212) 438-2402
Jaime A. Diaz Worldwide Wealth Management jdiaz@gunnallen.com (212) 248-1401
Judith P. Jayson U.S. Energy Development Corporation jpjayson@usenergydevcorp.com (800) 636-7606
Barbara Joiner Astra Capital Corp. bjoiner@astracapcorp.com (631) 465-2090
Robert L. Katzman, Esq. Robert L. Katzman, Esq. bob@katzmanlawoffice.com (518) 587-5500
Jonathan Kloos Terra Capital Properties jkloos@tcp-us.com (212) 753-5100
Dennis Mensi Cassin Cassin & Joseph LLP dmensi@ccj.net (212) 972-6161
Irving L. Metzger Metzger & Sons imetzger@aol.com (518) 584-3722
Will Obeid Gemini Real Estate Advisors, LLC wobeid@gemini-re.com (212) 871-6283
Ari Rosenblum Woodlark Capital, LLC arosenblum@wlfund.com (914) 285-4133
Michael Sarkozi Bear, Stearns & Co., Inc. msarkozi@bear.com (212) 272-8094
Scott Sheehan 1031 Investment Services LLC ssheehan@investorscapital.com (845) 534-6818
Kenneth A. Ulrich 1031 Retirement Solutions, LLC ken@ppsinconline.com (716) 633-7526
Paul White Professional Investment Advisors Inc. pwhite99@optonline.net (800) 748-5720
Ed Yu Carlton Advisory Services, Inc. eyu@carltongroup.com (212) 545-1000
Do's and Don'ts
DO advanced planning for the exchange. Talk to your accountant, attorney, broker, financial planner, lender and Qualified Intermediary.
DO NOT miss your identification and exchange deadlines. Failure to identify within the 45-day identification period, or failure to acquire replacement property within the 180-day exchange period will disqualify the entire exchange. Reputable Intermediaries will not act on back-dated or late identifications.
DO keep in mind these three basic rules to qualify for complete tax deferral:
* Receive only "like-kind" replacement property.
* Use all proceeds from the relinquished property for purchasing the replacement property.
* Make sure the debt on the replacement property is equal to or greater than the debt on the relinquished property. (Exception: a reduction in debt can be offset with additional cash; however a reduction in equity cannot be offset by increasing cash.)
DO NOT try to do a 1031 exchange yourself using your CPA or attorney to hold title or funds. IRS regulation requires a Qualified Intermediary to properly complete an exchange. Call us for the name of one that operates in your area.
DO attempt to sell before you purchase. Occasionally exchanges find the ideal replacement property before a buyer is found for the relinquished property. If this situation occurs, a "reverse" exchange (buying before selling) may be necessary. Exchangers should be aware that reverse exchanges are considered a more aggressive exchange variation because no clear IRS guidelines exist.
DO NOT dissolve partnerships or change the manner of holding title during the exchange. A change in the Exchanger's legal relationship with the property may jeopardize the exchange.
TIC FAQ - 1031 TIC Exchanges FAQ
1. What are the minumum investments for 1031 TIC Exchanges ?
2. Who can invest in 1031 TIC Exchanges?
3. How long is the holding period for the most 1031 TIC Exchanges?
4. Can I sell my TIC ownership?
5. What liability exposure is associated with 1031 TIC Exchanges?
6. Advantages of 1031 Exchanges
7. How will a Tenants In Common 1031 Exchange benefit me?
What are the minumum investments for 1031 TIC Exchanges?
The minimum investments range from about $100,000 to $500,000.
Who can invest in 1031 TIC Exchanges?
In most cases 1031 TIC Exchanges are offered only to accredited investors. An accredited investor is an investor with an individual income of $200,000 per year, or a joint income of $300,000 in each of the last two years and a reasonable expectation that the same level of income will be maintained. Or, an investor with a net worth exceeding $1 million, either individually or jointly with his/her spouse.
How long is the holding period for the most 1031 TIC Exchanges?
While market conditions may dictate otherwise, the idea with TIC's are to hold them between 4-8 years.
Can I sell my TIC ownership?
Generally yes, as long as provisions with the lender are met.
What liability exposure is associated with 1031 TIC Exchanges?
Usually loans on the property are not personally guaranteed (non-recourse), so TIC owners are not liable personally. Normal risks of real estate ownership are mitigated with insurance.
Advantages of 1031 Exchanges
It is often difficult in the short 45-day time frame to locate a property that has the right purchase price, debt ratio, and closing schedule to meet the 1031 exchange requirements-and then arrange any financing that may be necessary. A Tenants in Common ownership interest has a number of advantages, such as
* Flexible size to match your needs
* Pre-arranged financing
* Limited Management Responsibilities
* Potential for increased after-tax cash flow
* Economies of scale
* Can be identified and closed in a timely manner
* Investment can often be diversified into more than one property
How will a Tenants In Common 1031 Exchange benefit me?
You may own management-intensive real estate. Although you are comfortable with real estate investments and have had good returns in the past, you do not like the daily headaches that can accompany real estate management. You are ready to give up the hassles of dealing with tenants, maintaining facilities, paying property taxes, etc. You would like to sell your property but are faced with onerous tax consequences on the sale. You'd rather enjoy the income from the property and let someone else manage it. With a TIC 1031 Exchange, you can do exactly that.
A TIC 1031 Exchange allows you to exchange your management-intensive property for an institutional-quality property with the potential to generate steady income, tax benefits and appreciation. With a TIC 1031 Exchange, you no longer have to feel burdened by your real estate. Through your management contract, a manager will be retained to manage the asset while you enjoy all the benefits of income property ownership-and freedom from management duties.
Your income from the replacement property may be higher than you were receiving from the original property. You can earn substantial cash flow that may be up to 60% sheltered by the depreciation of your new basis in your TIC purchase.
No capital gains taxes may be due until the replacement property is eventually sold. If you shuffle off this mortal coil while owning a property, your heirs will receive a stepped up basis and the capital gains tax will be completely avoided.
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Posted by: Stuart Chamberlin, President | April 23, 2007 at 06:15 AM