High net worth, accredited investors looking for an investment alternative to traditional stocks, bonds, and mutual funds may want to consider investing in commercial real estate through a DST (Delaware Statutory Trust) or LLC with multiple investors.  The investments are known as MOREs – Multiple Owner Real Estate, and they are typically diversified portfolios of properties, such as retail, office and residential. They enable investors to select the private placement program that best suits their needs.

Advantages of Owning Commercial Real Estate

  • Portfolio diversification with value tied to bricks and mortar
  • Possible hedge against inflation
  • Income generated, if any, may be considered passive income
  • May provide monthly or quarterly cash flow
  • Capital appreciation may be possible on sale

Potential tax advantages through depreciation and other tax deductions may provide attractive tax equivalent yields. In the event of a profitable sale of a certain property, owners may explore the possibility of deferring the tax on their capital gain through a 1031 exchange.

Benefit of Passive Income Generators

Fortitude has the capacity to offer private-placement investments that may be passive income generators, presenting investors with opportunities they are often interested to discover. If you have other passive real estate investments in other passive programs – with expenses that exceed cash flow –  you have passive activity losses.

The only way to get a tax benefit from those passive losses before selling the passive real estate asset is to have passive income. Passive losses are not deductible against any kind of income except passive income.

Here’s How It Works

A hypothetical investor has $100,000 in passive activity losses, which he is looking to carry forward over a 10-year period. He is considering an investment that is expected to produce 6% in cash flow over a probable life of 10 years. Here is a formula he might use to determine the amount of money he would need to invest to produce $10,000 of passive income to offset his passive losses:

  • $100,000 passive activity losses divided by 10 years (carry-forward period)
  • Looking to offset $10,000 in passive activity losses per year
  • $10,000 passive income / 6% (hypothetical cash flow) = $166,666.00
  • Investment of $166,666.00 equals $10,000 of tax-free income per year assuming a continuing 6% cash flow

This is for educational purposes only, does not constitute an offer to buy/sell securitized real estate investments, and is not meant to be interpreted as tax or legal advise.  Because investor situations and objectives vary this information is not intended to indicate suitability for any particular investor. Please speak with your legal and tax advisors for guidance regarding your particular situation. Diversification is not a guarantee of future results. Potential returns/appreciation are not guaranteed and can be lower than expected.

There are risks associated with investing in Delaware Statutory Trust (DST) and real estate investment properties including, but not limited to, loss of entire principal, declining market value, tenant vacancies and illiquidity. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only.

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Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC, an SEC registered investment adviser. Insurance offered through Concorde Insurance Agency, Inc. Fortitude Investment Group is independent of CIS, CAM and CIA.

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