Sourcenet Investment Services LLC

Q: What is a 1031 Exchange?

A: A method by which the owner of appreciated property defers capital gains by purchasing eligible "Replacement Properties." Sourcenet has operated within the evolution of the DST and 1031 exchange space since the early development of these structures. We offer a no obligation consultation so you can put our knowledge to use for your property. Request an Appointment

What kind of property is eligible for a 1031 Exchange?

Investment real estate may qualify for a 1031 Exchange. Eligible property can include:Apartment buildingsRetail centersOffice buildingsFarms and ranchesRaw landCertain vacation or rental propertiesPrimary residences, business equipment, and personal property generally do not qualify.To complete a valid exchange, IRS rules must be followed carefully.

Can You Complete a 1031 Exchange Into Multiple Properties?

Yes. A 1031 exchange may include multiple replacement properties if IRS identification rules are followed properly.Common identification methods include:The Three-Property Rule: Identify up to three properties regardless of valueThe 200% Rule: Identify any number of properties that total do not exceed 200% of the value of the relinquished propertyThe 95% Exception Rule: buy 95% of properties identifiedCareful.

What is a DST (Delaware Statutory Trust)?

Delaware Statutory Trust (DST) is a specialized trust that meets the requirements for 1031 Tax exchanges.Some examples inlcude:Atlanta area, newly built, Class A garden-style mid-rise apartment communitySelf storage portfolio with properties in several statesSenior living community in affluent Illinois suburbStudent Housing servcing a state university

What is a “721 Exchange” or UPREIT Strategy?

Some 1031 exchange investors choose replacement property structures that may later convert into ownership units of a Real Estate Investment Trust (REIT). These are commonly referred to as “721 exchanges” or UPREIT strategies.Often, the investor initially acquires an interest in a Delaware Statutory Trust (DST) that is intended to transition into a REIT structure after a holding period.