1031 Exchange Information + Opinions on Triple-net (NNN) properties

1031 Exchange Property market report cont.

2005-06-15T06:33:00.000-07:00

Of the 9,400 currently available net leased properties, 17.3% were placed on the market within the last 30 days, 27.6% in the last 1-3 months, 28.5% in the last 3-6 months and 26.6% have been on the market for over 6 months. These percentages continue to illustrate a constant gain in the number of properties available since Q3 2004

If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

Triple-net Lease market research count.

2005-06-08T14:52:00.000-07:00

As of May 2005, 1031-NNN-Properties is currently tracking over 9,000 available net lease properties nationwide which have a combined value in excess of 28 Billion (the Net Lease Market). Comparatively, last quarter, we were tracking 8,400 available properties with a combined value of over 25 Billion- the aforementioned 9.9% increase in the number of available properties and a 11% increase in the cumulative value of such properties. These percentage increases confirm the steady growth of the net lease market .

If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

NNN Net Lease Market Research Market Cont.

2005-06-07T11:56:00.000-07:00

Despite the growth in the size of the NNN net lease market and the rise in short-term interest rates, the mean CAP Rates across all 3 net leased sectors has either remained stagnant or decreased over the last year. This is the resultt of the learge amount of equity that has been committed to the net lease sector that remains in search of transactions as the majority of institutional money in the net lease sector remains below their acquisition targets for the year.

If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

Net Lease Market Overview, Part 2

2005-06-06T10:32:00.000-07:00

Many net leased investors believe that the aforementioned growth is based on the widespread speculation of rising interest rates. While the Federal Reserve Board has continued to increase short term interest rates at a 'measure' pace, long term yields still remain near historical lows. In the first quarter of 2005, the economy expanded at a 3.1% annual rate, the slowest such rate in 2 years. This 'soft patch' in the economy tends to suggest that for the time being, debt yields will remain low.

If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

Net Lease Market Overview, 1st Quarter 2005 (first of long series, part 1)

2005-06-05T13:54:00.000-07:00

1031-NNN-Properties has done extensive research in the net lease marketplace and is looking forward to bringing this to the attention of many investors out there. The number of available properties has reached an all time high recently and all market indicators are showing that this will continue. We have seen this over the past quarter. Since Q1, 2005, the number of available NNN properties has increased almost 10%.

Tenants-in-Common FAQs

2005-06-05T05:40:00.001-07:00

Question: In a nutshell, what is TIC ownership?Answer: TIC ownership combined with NNN leases provide the real estate buyer with the advantages of ownership in a larger property, revenue and annual depreciation benefits without many of the day-to-day management problems associated with individually-owned rental property.
Question: What purchase amounts are ordinarily required for TIC ownership?Answer: Revenue Procedure 2002-22 issued by the IRS allows up to 35 TIC owners in any one property. Minimum purchase requirements are structured to meet this limitation and can range as low as $150,000 equity. The typical entrance in whole commercial building begins at $1 million, but through TIC ownership, the average person is able to enjoy ownership in an institutional-type property with a minimum purchase. Besides reliable income and growth potential, these properties are able to attract tenants with greater financial strength and stability than possible for the individual landlord.
Question: What happens if fail to close on my 1031 exchange?Answer: You will have to pay your capital gains taxes. Failure to close is the top reason clients reveal as to why they pay capital gains. By identifying a TIC property, you can reduce your potential tax risk, and avoid a failed closing. If you fail to close on other identified properties, you are able to move all your proceeds into the TIC property you identified.
Question: Is there any liability exposure associated with TIC ownership?Answer: The mortgages on most of the TIC properties offered by FOR 1031 are non-recourse. The TIC debt structure generally allows for the debt financing to assumed. Assumption usually occurs without the need for qualification or loan assumption fees.
Question: What if I want to sell my TIC ownership? Answer: On a decision requiring unanimous vote, such as a sale decision, a 75% vote by the TIC owners will be sufficient to initiate the impasse resolution procedure. This procedure allows the TIC owners with 75% or more of the property to make an offer to buyout the dissenting owner with 25% or less of the property. The dissenting TIC owners can either: (1) accept this offer, (2) buy out the 75% TIC owners at the same price per percentage ownership, or (3) change their dissenting vote to a consenting vote.
Question: What happens to my TIC ownership if I die?Answer. Your ownership interest will pass to your heirs pursuant to your will just like any other asset. Currently, the estate tax code provides that they will also receive a stepped-up tax basis to fair-market value, but you should check with your CPA or tax adviser because not all circumstances are alike. The income taxes which were deferred because of your 1031 exchange are potentially forgiven forever.
If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

What are the benefits of TIC ownership?

2005-06-05T05:40:00.000-07:00

The TIC structure has various features that make it attractive to the real estate buyer.
Access to Higher Grade Properties - The typical entrance in whole commercial building begins at $1 million, but through TIC ownership, the average person is able to enjoy ownership in an institutional-type property with a minimum purchase. Besides reliable income and growth potential, these properties are able to attract tenants with greater financial strength and stability than possible for the individual landlord.
Combined Real Estate Experience - As an alternative to sole ownership of real estate, a 1031 buyer can take ownership in a large commercial property along with other unrelated buyers, not as limited partners, but as individual owners. Each of the TIC owners brings their previous real estate knowledge to the group. Thus, each decision of the TIC ownership will be backed by many years of real estate experience.
Lessee with an established history of 1031 experience in Real Estate - Most of the day-to-day property operations are handled by the NNN PLUS lessee. The lessee has extensive experience in real estate. Thus, situations that arise in day-to-day operations will be addressed quickly and efficiently, and the TIC owner will enjoy the freedom from property management.
Simple Management - The TIC owner avoids the time and frustration of dealing with multiple tenants. You no longer deal with "toilets, tenants and trash," and simply receive your monthly rental income from your mailbox. Enjoy "tennis, travel and time with family."
Exact Dollar Matching - In a TIC property, you can purchase any amount above the minimum. For example, if you have $152,479 of equity from the sale of a previous property you can purchase $152,479 of equity in a TIC property.
Low Minimums - Revenue Procedure 2002-22 issued by the IRS allows up to 35 TIC owners in any one property. Minimum purchase requirements are structured to meet this limitation and can range as low as $150,000 equity.
Non-recourse Financing - The mortgages on most of the TIC properties offered by FOR 1031 are non-recourse. The TIC debt structure generally allows for the debt financing to assumed. Assumption usually occurs without the need for qualification or loan assumption fees.
Diversification - Due to the low minimums in TIC properties, the buyer can decrease risk by diversifying into different properties in various different marketplaces.
Speed and Simplicity - Speed and simplicity are achieved due to the efforts of the FOR 1031 team. The negotiation process is complete, and survey, rent rolls, etc. are already completed and available for your review. After your review of all the due diligence used to acquire your property, and upon your approval, you are ready to close. The closing can be completed in days, not months.
No Closing Costs - Absent seller default or other items outside the control of FOR 1031, closings are met within the agreed upon time frame. FOR 1031 does not charge the TIC owners any closing costs.
Deeded Interest - The TIC owners buy the property and receive a deeded interest. You can transfer this interest by gift, sale, inheritance, assignment, etc. Such transfer does not need to coincide with the transfer of all TIC interests in the property. DBSI Housing, if requested to do so by the TIC owner, will assist in the marketing of any TIC interest.
No Special Allocations - All the TIC owners receive monthly rental payments, sale proceeds and the depreciation tax benefits in proportion to their percentage ownership in the property.
Impasse Resolution Procedure - On a decision requiring unanimous vote, such as a sale decision, a 75% vote by the TIC owners will be sufficient to initiate the impasse resolution procedure. This procedure allows the TIC owners with 75% or more of the property to make an offer to buyout the dissenting owner with 25% or less of the property. The dissenting TIC owners can either: (1) accept this offer, (2) buy out the 75% TIC owners at the same price per percentage ownership, or (3) change their dissenting vote to a consenting vote.
Disclaimer: The above brief description is not to be construed as legal or tax advice and is qualified in its entirety by the actual closing documents. In case of any discrepancy, the actual closing documents will control.
If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

Tenants-in Common (TIC): What is it?

2005-06-05T05:39:00.000-07:00

A TIC is a form of real estate asset ownership in which two or more persons have an undivided, fractional interest in the asset, where ownership shares are not required to be equal, and where ownership interests can be inherited. Each co-owner receives an individual deed at closing for his or her undivided percentage interest in the entire property. Through TIC ownership, the average person is able to enjoy ownership in an institutional-type property with a minimum investment.
If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

The role of the Qualified Intermediary (QI)

2005-06-05T05:38:00.001-07:00

The QI is a person or entity that can legally hold funds to facilitate a 1031 exchange. To be qualified, the intermediary must not be relative or agent of the exchanging party. As an exception, a real estate agent may serve as an intermediary if the current transaction is the only instance in which the agent has represented the exchanging party over the past two years.The use of a QI is essential to completing a successful 1031 exchange. The QI performs several important functions in the 1031 exchange process including creating the exchange of properties, holding the exchange proceeds and preparing the legal documents.
If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

The History of a 1031 Exchange

2005-06-05T05:38:00.000-07:00

1918 - First income tax law1921 - Section 202 of Internal Revenue Code states that gain or loss not recognized on exchanges of like-kind property1924 - Non like-kind exchanges excluded from Section 2021928 - Code section changed to Section 112(b)(1)1954 - Section 1031 enacted1975 - Starker exchange; Tax court approves delayed exchange1977 - Tax court reverses prior ruling, invalidating delayed exchanges1979 - 9th Circuit reverses, reinstating initial ruling and creating delayed exchange1984 - Congress amends Section 1031; 45 day identification period and 180 day exchange period and partnerships excluded1991 - Regulations 1.1031 passed2002 - Revenue Procedure 2002-22 issued by IRS; 15 points to clarify TIC interests
If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

1031 Exchange Formats

2005-06-05T05:37:00.000-07:00

Simultaneous - Two-party swap- Alderson exchange
Delayed exchange (most common) - Safe Harbor
Multiple sales/acquisitions
Reverse exchange
Improvement exchange
If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

1031 Exchange: Like-Kind Property

2005-06-05T05:36:00.000-07:00

Like-Kind Property
In a 1031 exchange you can exchange any real property for any other real property within the United States or its possessions if said properties are held for productive use in trade or business or for investment purposes. Examples of like-kind property include apartments, commercial, condos, duplexes, raw land and rental homes*. As used in IRC 1031(a), the words "like-kind" mean similar in nature or character, notwithstanding differences in grade or quality. One kind of class of property may not, under that section, be exchanged for property of a different kind or class. Examples of qualified like-kind exchanges:
apartment building for farm/ranch
office building for hotel
raw land for retail space
unimproved property for commercial property
airplane for airplane
Examples of non like-kind properties include primary residences, stocks and bonds, notes, partnership interests, developed lots held primarily for sale and property to be resold immediately after initial purchase or completion of improvements. * Qualification for Section 1031 exchanges depends upon the extent of personal use.

If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

1031 replacement property identification

2005-06-05T05:35:00.001-07:00

3-property rule: You may identify any three properties as possible replacements for your relinquished property. More than 95% of exchanges use the 3-property rule. 200% rule: You may identify any number of properties as possible replacements for your relinquished property as long as the aggregate value of those properties does not exceed 200% of the value of your relinquished property. 95% exemption: You may identify any number of properties as possible replacements for your relinquished property as long as you end up purchasing at least 95% of the aggregate value of all properties identified.
If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

1031 Timelines

2005-06-05T05:35:00.000-07:00

Identification Period: Within 45 days of selling the relinquished property you must identify suitable replacement properties. This 45 day rule is very strict and is not extended should the 45th day fall on a Saturday, Sunday, or legal holiday.Exchange Period: The replacement property must be received by the taxpayer within the "exchange period," which ends within the earlier of . . . 180 days after the date on which the taxpayer transfers the property relinquished, or . . . the due date for the taxpayer tax return for the taxable year in which the transfer of the relinquished property occurs. This 180-day rule is very strict and is not extended if the 180th day should happen to fall on a Saturday, Sunday or legal holiday.
If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

1031 Exchange Rules

2005-06-05T05:32:00.000-07:00

What are the 1031 exchange rules?
The real property you sell and the real property you buy must both be held for productive use in a trade or business or for investment purposes and must be like-kind.
The proceeds from the sale must go through the hands of a qualified intermediary and not through your hands or the hands of one of your agents or else all the proceeds will become taxable.
All the cash proceeds from the original sale must be reinvested in the replacement property - any cash proceeds that you retain will be taxable.
The replacement property must be subject to an equal level or greater level of debt than the relinquished property or the buyer will either have to pay taxes on the amount of the decrease or have to put in additional cash funds to offset the lower level of debt in the replacement property.

For more information on 1031 exchanges and to acquire single tenant, triple-net (NNN) investment property, visit http://www.1031-nnn-properties.com/.

1031 Exchange: Why should you consider one?

2005-06-05T05:28:00.000-07:00

Defer paying capital gains taxes.
Leverage.
A properly structured exchange can provide real estate investors with the opportunity to defer all of their capital gains taxes. By exchanging, the investor essentially receives an interest-free, no-term loan from the government.
Relief from property management. The lessee takes the responsibility to sublet and maintain the property allowing real estate buyers to avoid most of the day-to-day management headaches.
Upgrade or consolidate property.
Diversify. Own multiple properties rather than just one.
Relocation to a new area.
Differences in regional growth or income potential.
Change property types among residential, commercial, retail, etc.

If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

Who should consider a 1031 exchange?

2005-06-03T14:20:00.000-07:00

If you have real property that will net you a gain upon sale (generally property that has been substantially depreciated for tax purposes and/or has appreciated in fair market value), then you are exactly the person who should consider a 1031 exchange.

There are 5 tax classes of property:
1) Property used in taxpayer's trade or business.
2) Property held primarily for sale to customers.
3) Property which is used as your principal residence.
4) Property held for investment.
5) Property used as a vacation home.

Section 1031 applies to the first and fourth categories, and potentially the fifth category. Business use is defined as, "To hold property for productive use in trade or business." Property retired from previous productive use in business can be qualifying property. Investment purpose defined as real estate, even if unproductive, held by a non-dealer for future use or increment in value is held for investment and not primarily for sale. Investment is the passive holding of property, for more than a temporary period, with the expectation that it will appreciate. Property held for sale in the immediate future is not held for investment.

If you are looking for a 1031 exchange property click here

What is the term Triple NNN?

2005-06-03T14:07:00.000-07:00

Triple NNN is just another name of a triple-net lease. With triple nnn leases the landlord has no responsibilities. Whether it's a roof leak, HVAC problem, paving, utilitities, he pays nothing. Walgreen's Properties are a perfect example of an absolute Triple NNN Lease. They are a 25 Absolute NNN Lease.

What are 1031 exchange services?

2005-06-03T09:39:00.000-07:00

What are 1031 exchange Services?

Under section 1031 of the Internal Revenue Code, a real property owner can sell his property and then reinvest the proceeds in ownership of like-kind property and defer the capital gains taxes. To qualify as a 1031 like-kind exchange, property exchanges must be done in accordance with the rules set forth in the tax code and in the treasury regulations. 1031 exchange services can offer significant tax advantages to real estate buyers. Often overlooked, a 1031 like-kind exchange is considered one of the best-kept secrets in the Internal Revenue Code.

For more information here are 2 good links:
http://www.1031-nnn-properties.com/1031-exchange.htm & http://www.1031-nnn-properties.com/1031.htm