At Fortitude Investment Group, we often find clients looking to dispose of their investment property and exchange it for another property or several properties, either actively managing themselves or taking the passive ownership approach. In these cases, a tax-deferred 1031 Exchange can be a powerful wealth-building tool that enables clients to defer capital gains tax and depreciation recapture.

Client needs range from large, complex cases to simpler situations. Still, all require creative solutions and benefit from the professional guidance and experience we provide in creating and managing these specialized structures. 

Here is a good example of how we helped a particular client:

A Fortitude client named Ann* had recently sold a property that was leveraged at approximately 61.18% loan-to-value. Ann could not locate a suitable property to exchange into and obtain a recourse loan to cover her mortgage replacement obligation on her forward exchange.

By sourcing and identifying a portfolio of different Delaware Statutory Trusts, or DSTs, we were able to meet all of Ann’s goals. Our solution included:

A passive income-potential-producing investment using two distinct DST structures that accommodated Ann's equity AND debt replacement requirements.

  • A highly leveraged, 82% loan-to-value, zero-coupon DST industrial distribution center.
  • A moderately leveraged, 53.5% loan-to-value multifamily residential DST.

This strategy also provided Ann with diversification from a single self-managed property into two passively-managed DSTs that held different property types in different locations.

  • 100% passive, institutional-quality assets with geographic diversification in the high-growth, tax-friendly states of Florida and Arizona.

The Fortitude team of professionals handled the entire transaction from start to finish, including all due diligence on the investment properties, coordination with Ann’s required Qualified Intermediary (QI), adherence to deadlines, and all related paperwork processing.

Today, Ann receives her distribution income from the passive multifamily property.** At the same time, she builds equity in the zero-coupon DST with the pay-down of the debt over the lifetime of the investment. Plus, she now has more time to spend on other projects.

How Fortitude Can Help

This case study is a great example of how Fortitude is qualified with proven experience to structure suitable programs that aim to benefit investors, and we would like to do the same for you!

With over 100+ years of combined experience facilitating 1031 and 1033 Exchanges, we are your trusted partners in helping you seek success. We believe that education and service matter, and we are committed to providing our clients with the resources required to facilitate the entire exchange process.

  • Experience in Section 1031 Exchange securitized real estate
  • Careful due diligence
  • Full disclosure of all details and parties
  • The security of bonded, reputable, qualified intermediaries

For more information, please feel free to schedule time with a Fortitude representative at your convenience here

Have you downloaded our latest ebook, The ABCs of DSTs?

New call-to-action*Name of client changed for blog article

**Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.

This is for informational purposes only, does not constitute as individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. Fortitude Investment Group does not offer legal or tax advice. Because investor situations and objectives vary this information is not intended to indicate suitability for any individual investor.  

There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Past performance is not a guarantee of future results.  Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation. This is not a solicitation or an offer to sell any securities. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney.

This is for informational purposes only and is not an offer to buy/sell an investment. 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. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This information is not meant to be interpreted as tax or legal advice. Please speak with your legal and tax advisors for guidance regarding your particular situation.

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

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