The 1031 Exchange Institute

Welcome to The 1031 Exchange Institute™. The 1031 Exchange Institute is your complete online resource for 1031 exchange, 1033 exchange, 1034 exchange, 721 exchange, 453 installment sale and 121 exclusion information.  Information will also be provided regarding Self-Directed IRAs, including Traditional IRAs, ROTH IRAs, SEP-IRAs and SIMPLE IRAs. 

The 1031 Exchange Institute is dedicated to educating and informing real estate investors and their advisors on the benefits of 1031 tax-deferred exchanges and other tax deferred and tax exlcusion strategies so they can make better informed investment decisions.


THE TIC INVESTMENT BLOG

Welcome to The TIC Investment Blog.  This TIC Investment Blog is brought to you by The 1031 Exchange Institute to help educate and inform real estate investors and their advisors so that they can make better informed real estate investment decisions.  The TIC Investment Blog will cover all things related to the investment in TIC Investments.  You are more than welcome to post a comment on any of the articles or ask follow-up questions, but please no solicitations or SPAM posts.

Thursday
Jul152010

Accredited Investor Definition Updated by Financial Reform Bill

The House of Representatives Bill HR 4173 known as the Financial Reform Bill was passed by the United States Congress today, Thursday, July 15, 2010.  It is anticiapted that HR 4173 will be signed by President Obama and become law next week.  HR 4173 also makes the increased FDIC insurance limits permanent.

The Bill directs the Securities and Exchange Commission (SEC) to make an important change to the "Accredited Investor" definition under Rule 501 of Regulation D.  This change to the Accredited Investor definition or standard is effective immediately once President Obama signs HR 4173 into law.

The new definition of the Accredited Investor status is extremely important in the context of private placement offerings (PPMs), including Tenant-In-Common or TIC Investment Properties, since most of these TIC Investment Property offerings are limited to Accredited Investors in order to qualify for certain offering registration exemptions with the Securities and Exchange Commission (SEC).

Investors satisfied the "Accredited Investor" definition prior to HR 4173 if the investor had a net worth exceeding one million dollars ($1 million), including the value of their primary residence (home). However, the investor's net worth requirement must now be computed without (excluding) the value of their primary residence (home).

There are other provisions for meeting the "Accredited Investor" status, including income test requirements.  HR 4713 does not change the annual income test for investors, but it does require the Securities and Exchange Commission (SEC) to analyze the "Accredited Investor" definition at least every four years.

Monday
Dec082008

Overview of TICs vs. NNNs vs. Buying Your Own Properties

I am always asked by our 1031 exchange clients what the difference is between buying their own real estate versus buying a tenant-in-common investment property also referred to as TICs versus buying a triple net lease investment property also known as NNN investments. 

It dawned on me that a concise overview of the differences would be a great post for our blog, so here is a brief overview for the novice investor to help them understand the basic differences between the various investment options that are available for them, including:

  • Buying and Managing Your Own Property
  • Investing in a Tenant-In-Common Property
  • Investing in a Triple Net Lease Property

Managing Your Own Property

The most common option for most investors is to buy and hold their own property.  You work with a real estate agent or broker that specializes in the area and type of property that you are interested in and acquire your own property.  You must do your own due diligence and make your own decisions regarding the purchase, so make sure that you have done your homework before you buy.  A good real estate agent that has a lot of experience with investment real estate can go a long way.

The novice real estate investor should probably start with smaller rental property such as a single family residence (SFR) or dupex, triplex, or fourplex, until they have more experience with investment real estate.   Four units or less is not considered commercial investment property and borrowing is much easier. 

You have complete responsibility for the property management, including, collecting the rents, paying the bills, etc. There is no minimum investment; it just depends on what you decide to buy.

Tenant-In-Common Investments (TICs)

Tenant-in-common investment properties or TICs tend to be much larger commercial properties. They can consist of an office building, industrial building, retail property such as a mall, large apartment complexes, student housing project, hotel such as a Courtyard by Marriott, and so forth. 

Generally the commercial property is valued well over $10 million, which is why you buy into a fractional interest. It gives those of us that can not afford the $10 million plus price tag individually a way to invest in large commercial properties by buying in with other investors. 

The property management is all arranged in advance through a commercial property manager, so you do not have any property management responsibilities.  You merely collect your monthly cash flow. 

The minimum investment amount can range from $25,000.00 to over $1,000,000.00. The average minimum is $200,000 to $400,000 for most TIC investments. The cash-on-cash return is based on the amount of equity that you invest in the TIC, so if you invest $500,000 into TICs the 6% to 8% returns, which are after expenses and debt service, would be calculated on the $500,000.00 and not the gross amount or puchase price.

TIC investments also provide you with a great way to diversify your investment portfolio. You can place $500,000 into two (2) different TICs instead of just one property.  You can diversify by asset class (type of commercial real estate) and by location.  It allows you to spread your risk around better than if you invested in your own properties. 

Triple Net Lease Properties (NNNs)

These are also large commercial properties, but they are not sold on a fractional interest basis. One investor generally buys the entire investment property and then leases the property on a triple net lease basis to a single tenant like Walgreens, CVS Pharmacy, fast food franchise, Starbucks, and the like. 

The property is managed by the tenant since it is a triple net lease property. You have no property management worries.  You merely collect your net rent check each month. 

The minimum investment amounts are much higher for NNNs since there is only one investor/owner. The cash-on-cash return is generally a little less than TICs because these are also a little safe (less risk) than TICs.

You can certainly sell multiple properties and 1031 exchange into one NNN property, and because you own 100% of the triple net lease property you have complete control over the decisions to buy, sell, refinance and leasing. 

Risks

You must remember that all of the above investments are real estate investments and will bear all of the inherent risks associated with real estate ownership, including drop in value, maintenance, deferred maintenance, capital improvements, cash calls if cash flow drops significantly, ability or inability to refinance depending on the capital, credit and real estate markets, etc.

Read Overview of Tenant In Common Investment Properties Interests, including links to other articles, for more complete information regarding the risks involved with TIC investments. 

Always assemble your real estate team before proceeding.  The one largest mistake that beginners always seem to make is not spend money on advisors when they should.  Advisors can keep you out of trouble and is money well spent. 

Tuesday
Sep022008

1031 Exchange & TIC Investment Property Seminar in Long Beach, California

SCI Real Estate Investments and Exeter 1031 Exchange Services cordially invite you to:

 

Tax Deferral and Replacement Property Solutions
in a 1031 Exchange


Wednesday, September 17, 2008

9:00am - 12:00pm
Holiday Inn Long Beach Airport

2640 N. Lakewood Blvd.

Long Beach, CA 90815

 

This is an intermediate level discussion on Section 1031 Tax-Deferred Exchanges. The program will include the requirements, structures, processes, strategies, and compliance issues necessary to successfully complete a 1031 exchange, including a discussion of Tenant-In-Common (TIC) investment properties as 1031 exchange replacement property solutions.  Click here to RSVP

Monday
Aug112008

Contemplating Selling Your Local Income Property?

But Don't Know What to Do with the Proceeds?

By
Don Meredith
Concorde Exchange Group

If you are like many Southern Califor­nians who own investment property, you may be facing a common dilemma. You'd like to cash in and make the most of your income property but you're not familiar with the alternatives available. Be­fore you sell, it is critical to be aware of the obstacles and traps ahead so you can es­cape paying higher taxes while maximiz­ing the returns on your real estate assets.

It is known that the rental market in Southern California has failed to keep up with the rapid appreciation of property values resulting in returns of one to three percent on equity and extremely low CAP rates upon sale. Today's real estate and fi­nancial experts have extensively re­searched the current Southern California market and want to let you know there is good news. Don Meredith of Concorde Exchange Group-Professional Asset Management states, "If you are looking to take advantage of the market at its peak while avoiding a large tax consequence, then a 1031 Exchange from apartments to commercial may be the perfect solution."

Meredith points out that there are four options, but the 1031 Exchange will offer the best return on your investment. Op­tion 1: Pay the tax. Option 2: Transfer as­sets to a CRT (charitable remainder trust). Option 3: Exchange into an individ­ually owned apartment or commercial property. Option 4: Exchange into an in­stitutional class Tenant in Common (TIC) offer, backed with AAA rated tenants and institutional level property management.

Don Meredith explains, "In 2002 the IRS opened the door to a world of possi­bilities for owners looking to sell their appreciated property allowing for a 1031 Ex­change by way of a TIC situation." A pop­ular candidate for the TIC alternative is an income property owner seeking a change from active to passive real estate ownership, as well as looking to relieve themselves of tenants, headaches and management. A TIC allows you to go from owning 100 percent of your property to owning a certain percent of a much larger piece of real estate depending on the investment amount. This enables mult­iple owners to purchase larger and higher-quality properties with investment grade tenants, in turn, potentially greatly increasing their monthly income while putting trapped equity to work.

Meredith represents over 60 TIC Real Estate Companies. Generally TIC's are marketed as securities not real estate. Darryl Stein­hause, Esq. Partner from Luce Foward Hamilton & Scripp quotes "The SEC defines TIC's as securities as does the State of California”. Meredith goes on to say, "In my opinion, the securities TIC's are the only way to go from a regulatory front and from the investors point of interest. There is complete transparency and more importantly often a 3rd party due dili­gence consultant and independent re­viewer.

William L. Exeter, president and chief executive officer, Exeter 1031 Ex­change Services, LLC comments that "TIC’s help investors diversify their real es­tate investment portfolios where they oth­erwise could not. Investors are often concerned about the 45 day identification deadline. The TIC investment can significantly reduce the risk and stress involved with the 45 day period because the Investor can not only identify but in most cases actually close on the TIC investment during the 45 day period."

You can ask Mr. 1031 any questions you may have about 1031 exchanges, replacement property options by e-mailing him at meredth1@san.rr.com call him at 1-800-479-9299 or visit their website at http://www.donmeredith1031.com/ Ask about 1031 Workshop dates

Thursday
Jul032008

Featuring Sid Jain with Money Mall USA, Inc.

Real Estate Investment Advisor

Real estate investors are always looking for new real estate investment ideas and concepts, especially given the difficult real estate market that we find ourselves in today.  Please allow us to introduce a tenant-in-common investment property broker to you.

Sid Jain's Biography

Mr. Jain has 18 plus years investment experience within the United States of America. Prior to working in the United States he was employed for 4 years in the country of India, where Mr. Jain worked with Reliance Industries in their Retail Marketing Division creating fabric showrooms and handling rinancial instruments, raising equity capital for the company.

Educational Background

He holds an MA in Economics from the University of Jabalpur (Now RD University) and a BA in Economics and Math, from St. Aloysius College. He was educated from Grade K through High School at one of the finest private catholic convent schools in India, St. Aloysius School, which is now 137 years old. His “Alma Mater's” motto was "VIRTUS ARDUO," which means “virtue in hard work”. Sid attended University of Georgia in the PHD Economics program, Athens, Georgia, initially in the USA. Later, in 1989, he transferred to an Ecumenical "Master in Religious Education" Program at Barry Town, New York for personal and spiritual enrichment.

Civic Activities

Sid also participates in various inter-faith/cultural/rebuilding/community service programs on three Continents, including Asia, Europe and in the United States. On a local basis, Mr. Jain volunteers at a community center in the City of Sunnyvale and the local silicon valley real estate community.

Professional Career

Sid is a licensed and registered securities representative.

MoneyMallUSA Corporation was founded by Mr. Jain in 1999. Their registered Broker-Dealer is Emerson Equity, LLC, located in San Mateo, California.  Sid Jain’s real estate broker is Mr. Joe Atab who is with First City Bancorp Mortgage, Inc. They are licensed, bonded and insured.

They have over ten years securities and real estate experience, including representing clients in the acquisition of tenant-in-common investment property offerings or TIC investments as replacement property solutions for their 1031 tax deferred exchange transactions.  

Regulatory Bodies

They are regulated by Federal and state securities laws, including the SEC, FINRA (formerly NASD), state securities agencies, and through the Department of Real Estate in certain states.  Sid Jain and/or MoneyMallUSA Corporation is a member of NASD (registered rep.), Member of California DRE (as salesperson), Member-Financial Planning Association, past member of NAIFA (National Association of Insurance and Financial Advisors), Member and Sponsor of COIAR (Council of Indian American Realtors), Member-CA Department of Corporations, Member, Nevada Department of Corporations, Member, Tenant In Common Association (TICA), Member, CA Apartment Association, and a member/contributor of numerous environmental, conservation, cultural, service and charitable organizations worldwide. MoneyMallUSA Corporation is a 1031 exchange, Tenant in Common (replacement) property* Broker.

You can reach them at (408) 836-3858 or sidjain@mymoneymall.com.  

SID JAIN
President
MONEYMALLUSA CORPORATION
sidjain@mymoneymall.com
(408) 836-3858