1031 Property Types

Commercial Real Estate

The majority of 1031 exchanges completed include the exchange of a commercial asset. These properties can be sold and traded with like-kind properties, including alternative real estate investments. These opportunities, available with Perch Wealth, can provide commercial investors with new strategies to improve their investment position.

Commercial assets encompass a broad range of properties, and so long as the commercial asset meets the IRC requirement that they are the same in nature or character, they can differ in grade or quality. As a result, investors can trade across asset classes throughout the country via their 1031 exchange. Commercial assets include office buildings, medical centers, multifamily housing buildings, educational institutions, hotels and motels, retail stores and shopping malls, vacant land, and industrial properties. The property investor must retain full fee simple ownership in the asset. Leasehold assets could qualify for a 1031 exchange; however, they must have at least thirty years remaining on the lease. Trading between asset classes can offer new opportunities the investor had not had at the beginning of their investment career.

Delaware Statutory Trust (DST)

Investors looking to forego management responsibility but still take advantage of a 1031 exchange can trade from their relinquished property into a Delaware Statutory Trust, or DST, which qualifies as their replacement property. A DST is a real estate ownership structure that allows investors to purchase a fractional interest in the holdings of a trust. The trust is used to purchase and hold real estate investments across the United States based on the DSTs investment goals. For example, a DST can specialize in triple-net single tenant properties across the US or multi-family assets in the Southeast. Exchangers can select to invest all or a portion of the proceeds from the sale of the relinquished property into a DST.

DSTs offer real estate investors the following benefits: investment in institutional quality properties; limited liability; excellent financing through a DST sponsor; debt obligation management; passive income; and a cash-out opportunity. Once the DST sells, investors can continue to defer capital gains through a 1031 exchange.

Oil, Gas, and Other Rights

Many real estate investors are unaware of the various alternative investment solutions available via a 1031 exchange. One that is often missed is an investor’s ability to trade into oil, gas, and other rights. The team at Perch Wealth can provide the education and resources every investor needs to complete this type of transaction.

Per the Internal Revenue Code (IRC), oil, gas, and other rights can qualify as like-kind if their interest meets the like-kind requirements and is therefore defined as real property. Interest in oil, gas, and other rights is considered either the relinquished or replacement property. As demand for those resources continues to increase, an influx of investment opportunities has become available to accredited investors. In addition to providing investors access to a management-free investment, oil, gas, and other rights enable them to diversify their portfolio while mitigating risk by investing in assets with a low historical correlation with traditional stocks, bonds and equities. Investors can also use these alternative investments to invest leftover proceeds from their 1031 exchange, delivering a tax-deferral solution to a standard 1031 exchange problem.

Income Rental Property (IRC)

Leveraging a 1031 exchange to sell a residential unit comes with strict guidelines, and the Perch Wealth team will walk investors through the process – helping them determine whether a property qualifies and providing insight into exchange opportunities after the property’s sale.

Only income rental properties that meet Internal Revenue Service (IRS) guidelines on like-kind properties can be sold and exchanged via a 1031 exchange. An investor’s primary residence or vacation rental cannot be exchanged; only a property that has been held as an investment and rented for one year qualifies. All income rental property that meets these requirements can be traded in a 1031 exchange. After selling an income rental property, investors can trade into another asset that better suits their investment objectives. For example, an investor may be entering retirement and ready to let go of the management responsibility that comes with an income rental property. In this scenario, the investor could sell the income rental property and trade it into a like-kind asset, such as Delaware Statutory Trust (DST), which requires zero management responsibility.

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No Risk Consultation

Securities offered through Emerson Equity LLC, member FINRA / SIPC. This is not an offer to buy or sell securities. Securities investing carries an inherent risk of loss of some or all of the principal invested. We are not tax professionals. You should always discuss your investments with a tax professional prior to investing. Securities are sold only in those states where Emerson Equity LLC is registered. Perch Wealth LLC and Emerson Equity LLC are not affiliated. COMPANY and Emerson Equity LLC do not provide legal or tax advice. Securities offered through Emerson Equity LLC Member FINRA / SIPC and MSRB registered. Emerson Equity LLC is unaffiliated with any entity herein.

Perch Financial LLC and Emerson Equity LLC do not provide legal or tax advice. Securities offered through Emerson Equity LLC Member FINRA/SIPC and MSRB registered. Emerson Equity LLC is unaffiliated with any entity herein. 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

No offer to buy or sell securities is being made. Such offers may only be made to qualified accredited investors via private placement memorandum. Risks detailed in a private placement memorandum should be carefully reviewed, understood, and considered before making such an investment. Prospective strategies and products used in any tax advantaged investment planning should be reviewed independently with your tax and legal advisors. Changes to the tax code and other regulatory revisions could have a negative impact upon strategies developed and recommendations made. Past performance and/or forward-looking statements are never an assurance of future results.

Many of the investments offered will be only available to those investors meeting the definition of an Accredited Investor under SEC Rule 501(A) and offered as Regulation D private placement securities via a Private Placement Memorandum (“PPM”). Prospective investors must receive, read, and understand all the risks associated with buying private placement securities. Investments are not guaranteed or FDIC insured and risks may include but are not limited to illiquidity, no guarantee of income or guarantee that all tax advantages or objectives will be met and complete loss of principal investment could occur.

Risk Disclosure: Alternative investment products, including real estate investments, notes & debentures, hedge funds and private equity, involve a high degree of risk, often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop. There may be restrictions on transferring interests in any alternative investment. Alternative investment products often execute a substantial portion of their trades on non-U.S. exchanges. Investing in foreign markets may entail risks that differ from those associated with investments in U.S. markets. Additionally, alternative investments often entail commodity trading, which involves substantial risk of loss.

NO OFFER OR SOLICITATION: The contents of this website: (i) do not constitute an offer of securities or a solicitation of an offer to buy of securities, and (ii) may not be relied upon in making an investment decision related to any investment offering by Perch Financial LLC, Emerson Equity LLC, or any affiliate, or partner thereof. Perch Financial LLC does not warrant the accuracy or completeness of the information contained herein.