Case Study for Delaware Statutory
The case study below is merely provided to demonstrate the 1031 process and potential benefits. Each investor’s experience may be different and past performance is not an indication of future performance. All investing involves risk of loss of some or all principal invested.
Trust Investment Summary
In 1998, Karen and her husband Bob purchased a 12-unit apartment building in San Francisco, California, for $480,000. In March 2021, they sold the property through their real estate broker for roughly $3.3 million.
Their reason for finally selling was that they no longer wanted to manage the property or deal with restrictive rules and regulations when Bob retired. In addition, they wanted to diversify their investment portfolio beyond just one property in one location and, with any luck, improve their after-tax cash flow.
While the property was in escrow, Karen and Bob had the opportunity to invest in a Delaware statutory trust (DST). They partnered with a team of qualified professionals to outline a 1031 exchange into institutional-quality, professionally managed DSTs that would allow them to defer all capital gains taxes while achieving their other objectives.
For Karen and Bob, it was “Mission Accomplished.” They successfully completed their 1031 exchange and now own an interest in seven different properties with a total value of over $1.2 billion. Their portfolio has significantly diversified by type, geography, number of tenants, income source, etc. (SEE ATTACHED DST INVESTMENT SUMMARY)
Most importantly, their real estate portfolio is now hassle- and property management-free, which permits them to pursue other, more enjoyable interests.
Disclaimer: Not an offer to buy, nor a solicitation to sell securities. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing. Any information provided is for informational purposes only.
Securities offered through Arkadios Capital, member FINRA/SIPC. Advisory Services offered through Arkadios Wealth. Perch Wealth and Arkadios are not affiliated through any ownership. 1031 Risk Disclosure: There is no guarantee that any strategy will be successful or achieve investment objectives; Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments; Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities; Potential for foreclosure – All financed real estate investments have potential for foreclosure; Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments. Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions; Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits.