Speed Matters: 1031 Exchangers Find Closing Relief with DSTs

Ability to close quickly proving to be a lifesaver for 1031 Exchange investors.

It has been estimated that nearly a third of all investment property real estate transactions are conducted using a 1031 Exchange. The ability to sell an investment property and purchase another like-kind property, while deferring capital gains is a primary reason 1031 Exchanges are so popular among real estate investors.

But with so much our economy shut down right now and with stay-at-home orders and general fear of the coronavirus persisting, it has been exceedingly difficult for exchangers to complete their transactions within the defined 1031 Exchange deadlines. That has left a lot of investors stranded. And while the IRS recently issued a notice extending those deadlines to July 15, 2020 for certain exchangers, challenges persist, including:

• Shelter-in-place orders are still in effect in many areas
• Business and government entities important to real estate transactions are shuttered
• Valuing properties is extremely difficult with tenants seeking rent relief and landlords trying to stabilize income
• Lenders have pulled back making the loan application process slow and challenging
• Viewing and inspecting properties is often impossible, hindering the critical due diligence process

So, what a you to do if you are in the middle of a 1031 Exchange? Fortunately, there is an answer, and it is the Delaware Statutory Trust (DST). The DST is structured so that investors are offered the opportunity to own a fractional interest in institutional quality property (or properties) that have already been vetted, valued, purchased and coupled with loans (in many cases). Because so much of this transactional work has already been completed, 1031 exchangers or often able to close on their replacement property in as little as 2-3 days, thus satisfying the 45-day and 180-day schedules required of an exchange.

At a time when so much of our world seems to have slowed to a crawl, speed matters for investors using a 1031 Exchange and the DST is proving to be a lifeline for so many.

For more information this, please feel free to contact our team.  You can also schedule a one on one meeting with us at your convenience here.