Kay Properties and Investments, LLC

DST 1031 Exchanges: Pros, Cons, and Expert Insights | Kay Properties and Investments, LLC

https://www.youtube.com/watch?v=vYtNowWEuiE

Jump into the world of DST 1031 exchanges! Discover the pros and cons, the power of diversification, and how to make passive investments work for you. Brought to you by the experts at Kay Properties & Investments.
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In the realm of real estate investing, the 1031 exchange Delaware Statutory Trust can provide savvy real estate investors a unique opportunity to achieve passive management, the potential for regular monthly distributions, and a way to enter one of the most tax efficient real estate investment strategies available today. One of the best ways to maximize this real estate investment strategy is by first understanding the pros and cons of the Delaware Statutory Trust.

This video will jump right into three specific advantages and three disadvantages associated with DST 1031 exchanges and provide a comprehensive look into this popular investment strategy.

Register for FREE access to the Kay Properties Marketplace of Delaware Statutory Trust listings here: https://www.kpi1031.com/marketplace/
To learn more about Delaware Statutory Trusts here: https://www.kpi1031.com/resources/

The Kay Properties team of experts https://www.kpi1031.com/meet-our-team/ have been involved with more DST exchanges in a single year that most DST providers have done in an entire career. Recently our team stat down and discussed in detail the ins and outs of the Delaware Statutory Trust investments structure.

Key Takeaways from this informative video include:
1:12 - What does a diversified Delaware Statutory Trust portfolio look like?
2:24 - Delaware Statutory Trust properties are truly passive investments with no active management responsibilities.
4:00 - Delaware Statutory Trust properties are pre-packaged so that investors can close in as little as 3-to-5 days.
8:10 - The majority of Delaware Statutory Trust properties have leverage, exposing investors to the possibility of lender foreclosure.
11:58 - Like all real estate investments, there are no guarantees when it comes to investing in Delaware Statutory Trust properties.

All DST properties shown are regulation D Rule 506(c) offerings and are subject to availability. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million exclusive of primary residence, and/or possessing an annual income of over $200,000, or $300,000 with a spouse and expects the same or greater for the current year) and accredited entities (generally described as an entity owned entirely by accredited investors and/or owning investments in excess of $5 million). Please check with a qualified CPA or attorney to determine if you are accredited. There is no guarantee the offerings shown will be available for purchase. Do not consider this material to be tax or legal advice. Please consult your CPA or attorney prior to investing. All real estate and DST properties contain risk. Past performance does not guarantee or indicate the likelihood of future results. Diversification does not guarantee returns and does not protect against loss. Securities offered through FNEX Capital LLC member FINRA, SIPC.

DST 1031 Exchanges: Pros, Cons, and Expert Insights | Kay Properties & Investments Jump into the world of DST 1031 exchanges! Discover the pros and cons, the power of diversification, and how to make passive investments work for you. Brough...

Be sure to check out KayProperties’ informative weekly tomorrow. Learn how #1031 are a great investment option. RSVP now by calling the number above.



Disclosure: Securities offered through registered representatives of FNEX Capital, Member FINRA/SIPC. Kay Properties and Investments, LLC and FNEX Capital are separate entities; all of whom are unaffiliated with third-party sites, cannot verify the accuracy of, nor assume responsibility for any content of linked third-party sites. Information available on third-party sites is for informational purposes only.

For full disclosure visit kpi1031.com

Every week a Kay Property DST specialist hosts the Kay 1031 DST conference call covering many details about real estate investing, 1031 Exchanges and Delaware Statutory Trusts. Join our conference call
every Friday by calling the number below.

#1031


Disclosure: Please note that with all real estate there is a risk of loss of entire investment
principal. Potential cash flow, potential returns and potential appreciation are not
guaranteed. For full disclosure visit kpi1031.com. Securities offered through registered
representatives of FNEX Capital, Member FINRA/SIPC. Kay Properties and Investments, LLC
and FNEX Capital are separate entities; all of whom are unaffiliated with third-party sites,
cannot verify the accuracy of, nor assume responsibility for any content of linked third-party
sites. Information available on third-party sites is for informational purposes only

How to guard against the pitfalls of financing used in DSTs
By Dwight Kay, CEO of Kay Properties and Investments and the Kay Properties Team

Investors going into a DST investment are often laser focused on the property they are buying. Where is their money going – perhaps it’s an apartment complex in Dallas or a portfolio of dollar stores in the Midwest? Investors often “kick the tires” so to speak looking at factors such as the location, occupancy, rental income and credit quality of the tenants. One question that often gets pushed lower on that checklist is what type of financing the property has in place.

Debt on the real estate is an important part of the deal, and unlike a home mortgage, financing is not always structured the same. Kay Properties typically cautions clients to avoid taking on any additional burden of debt when investing in DSTs. Taking on an asset with debt is inherently more risky than acquiring a property with no leverage or debt obligation. Yet it is common for DST properties to have 10-year financing in place which can potentially help to mitigate 1031 exchange closing risk for investors. In addition, for investors conducting a 1031 Exchange who need to replace debt in the exchange, DSTs are an ideal solution. You don’t have to buy too much debt, and you don’t have to go to a bank to take out a loan or sign personally for that loan.

Financing options for commercial real estate properties can span a variety of different structures and terms. When assessing DST investment opportunities, it is important to know whether or not the DST has financing in place, and if so, are there any potential “red flags” associated with that financing. Part of the job of Kay Properties team members when working with investors is making sure that clients are aware that a DST has financing in place, and if so, are there any potential pitfalls that could impact investment performance.

Potential Financing Pitfalls

Pre-payment penalties or defeasance costs. A loan might be defeased or paid off prior to the end of the term, such as is the case with a sale. However, some lenders have onerous pre-payment penalties or “yield maintenance” clauses in the loan agreement that protects their financial interests even if the borrower decides to exit the loan early.

Foreclosure: If a property underperforms or loses a tenant and is unable to generate enough income to pay its debt service, the lender could foreclose on the property. If that were to occur, investors could lose part or all of their equity investment. For those investors not wanting to face a potential foreclosure and loss of capital the Kay Properties team would advise them to consider debt free DSTs which are also called all cash DSTs. These debt free DSTs don’t have a long-term loan and as such don’t have the risk of foreclosure from a lender making them a lower risk alternative to the typical leveraged DST investments. At any given time approximately 80-95% of the DST inventory is leveraged with debt so working with Kay Properties provides investors oftentimes with a much larger selection of debt free DST options than is usually available in the marketplace due to the Kay exclusive all cash DSTs that we have curated for our clients.

Cross-collateralized debt. Some DST portfolios have financing that is cross-collateralized. Say you buy into a DST investment that includes 15 different net lease properties with different tenants. If one of those properties struggles and the tenant can’t make its monthly rent payment, the lender may have all sorts of clauses and conditions that affect the other 14 properties that are performing due to the one that is not performing. If the loan is cross-collateralized, or effectively tied to the financing on the other 14 properties, one bad property could potentially drag down the whole portfolio and result in major issues for investors on their entire investment. For example, a lender might exercise their right to call for a “cash flow sweep”, holding rent from all of the properties until the situation with the problem property is resolved. Investors do need to be aware of DSTs that are structured with cross-collateralized debt and what that could mean for potential problems if a property or properties underperform. One way to protect yourself is if you are considering a diversified net lease DST portfolio that does have cross collateralized debt it is wise to consider it as a piece to an overall diversified* portfolio of completely separate DST offerings so that if something were to happen as in the examples above you only had a smaller portion of your 1031 investment in that one DST portfolio. Oftentimes, investors will seek to place all of their 1031 equity into a single diversified net lease portfolio with debt thinking that this provides them plenty of diversification. However, if things don’t work out as planned that investor will have wished they had utilized a diversified DST offering approach whereby their 1031 equity was placed into multiple completely separate DST offerings.

Balloon Payments: Some loans are structured with a large balloon payment at the end of the loan term. In most cases, the strategy at the end of the loan term is to sell the property and pay off the loan. What happens if the property is not able to be sold by the end of the loan term? The DST sponsor would have to spring into an LLC and refinance the asset. This poses a problem as it could cause potential tax implications for investors as well as what if there is a credit crunch like there was in 2009 and financing is not readily available? This would mean the property would be potentially foreclosed on by the lender and investors would likely lose their entire amount invested. As a way to avoid this catastrophe investors should when at all possible look to invest in DST investment opportunities that are debt free and have no long-term mortgages encumbering the assets. This debt free strategy is one that those not comfortable with the risk of lender foreclosure would be wise to seek out and employ for their 1031 exchange into DST investments.

Debt financing is common in the broader universe of real estate investments. Likewise, an investor may be perfectly comfortable investing in a property that has cross-collateralized debt or pre-payment penalties on a loan. What is important for investors is to know what financing exists on a DST investment in order to avoid any unpleasant surprises. For investors wanting to view available leveraged DST investments as well as all-cash/debt-free DST investments please register at www.kpi1031.com.

*Diversification does not guarantee profits or protect against losses.
About Kay Properties and www.kpi1031.com
Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market. Kay Properties team members collectively have over 150 years of real estate experience, are licensed in all 50 states, and have participated in over $30 Billion of DST 1031 investments.

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation. There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed.

Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. Securities offered through FNEX Capital, member FINRA, SIPC.

How to guard against the pitfalls of financing used in DSTs - Kay Properties Investments By Dwight Kay, CEO of Kay Properties and Investments and the Kay Properties Team Investors going into a DST investment are often laser focused on the property they are buying. Where is their money going – perhaps it’s an apartment complex in Dallas or a portfolio of dollar stores in the Midwest?...

Alternative Investments for High-Net-Worth Investors
By: The Kay Properties Team

High-net-worth investors sometimes seek alternatives to investing in traditional asset classes like stocks and bonds. Real estate, in general, has historically been a good way for investors to diversify* their holdings with hard assets. Delaware Statutory Trusts (DSTs), Qualified Opportunity Zone Funds, and Real Estate Funds can provide investors with access to real estate investments that can potentially provide monthly distributions, zero management responsibility, diversification and tax benefits not always found with other investments.

For example, investors can place their money in a portfolio of income-producing, institutional-grade commercial real estate, that provide passive returns with no management responsibility that are either leveraged or debt-free, diversified based on geography and asset type, debt-free offerings that have no risk of lender foreclosure, potential to invest in Covid-19 resistant investments, an alternative to investing in the stock and bond market that can potentially be more volatile and uncertain, and potential capital appreciation.

If you are high-net-worth investor, register at www.kpi1031.com for a list of real estate investment opportunities that may be a potential fit for you.

*Diversification does not guarantee profits or protect against losses.
About Kay Properties and www.kpi1031.com
Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market. Kay Properties team members collectively have over 150 years of real estate experience, are licensed in all 50 states, and have participated in over $30 Billion of DST 1031 investments.

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation. There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed.

Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. Securities offered through FNEX Capital, member FINRA, SIPC.

Alternative Investments for High-Net-Worth Investors | KPI If you're high-net-worth investor, register with Kay Properties for a list of real estate investment opportunities that may be a fit for you.

Back to the Basics: How to Invest In Uncertain Times
By: Matt McFarland, Vice President at Kay Properties and Investments

All investors know and understand that the economy goes through periods of expansion and contraction. The real estate markets behave and exist in cycles – years of growth followed by years of regression. Over the last 10 years, the United States has experienced phenomenal growth when it comes to real estate. We now find ourselves in a very interesting time in the cycle, asking the same question that we have asked the entire time along the way – what is the best way to invest in this market?

The truth is no one truly knows how or when the next correction will come to be; no one knows the severity of the correction and exactly how long it will last. To this, we remain cautious in our approach to investing, paying extra careful attention to macroeconomic trends as well as market-specific trends.

When it comes to investing in real estate, the most basic tenant of “location, location, location” is foundational to that investment’s success. Is the property located on the corner of main and main, or is it off the beaten path? How does this property compare to other properties in the same market? hat is the properties curb appeal? Who is my targeted renting demographic and what are the trends in this market specifically that position this property for success?

In addition to and beyond the specific investment itself, diversification* is a fundamental aspect for defensively positioning one’s investment portfolio. Diversification is an element that many investors seek across their investment portfolios and proves to be exceptionally valuable in difficult and uncertain times in our economy. At Kay Properties, we take this imperative approach to real estate investing. Many of our investors are looking to defensively position their real estate investments and one of the easiest ways they accomplish this goal is through diversification. Of course, diversification does not guarantee against losses, however, it can help eliminate concentration risk and potentially mitigate more significant loss were one to concentrate more heavily into an investment that was adversely affected in the future.

Even beyond diversification, holding power in an investment is vitally important to withstand any trying times in the future. When it comes to real estate, the best way to maintain holding power is through eliminating debt when possible. By taking a third party lender out of the equation, one is typically able to weather and work through any difficulties that come up in the future.

For more information on the 1031 exchange process and how investors utilize DSTs to diversify and prepare for the future, please reach out to your Kay Properties Registered Representative or visit www.kpi1031.com for more resources.

*Diversification does not guarantee profits or protect against losses.
About Kay Properties and www.kpi1031.com
Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market. Kay Properties team members collectively have over 150 years of real estate experience, are licensed in all 50 states, and have participated in over $30 Billion of DST 1031 investments.

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation. There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed.

Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. Securities offered through FNEX Capital, member FINRA, SIPC.

Back to Basics: How to Invest In Uncertain Times For more info on the 1031 exchange process and how investors utilize DSTs to diversify and prepare for the future, please reach out to Kay Properties.

Why Real Estate Syndication Is Important for Delaware Statutory Trust 1031 Exchange Real Estate Investors
Key Takeaways:

How does Delaware Statutory Trust Syndication benefit investors?
Why Real Estate Syndication via a DST can potentially reduce risk for investors*?
What is the Portfolio Optimization and Diversification Theory?
How real estate syndication and DST investments can help investors access larger real estate assets?
Delaware Statutory Trust 1031 exchanges have never been more popular, and one of the reasons behind this growth and investor appeal is the power and flexibility of real estate syndication. Real Estate syndication is a major underlying principle for how a Delaware Statutory Trust 1031 investment is structured, and why they continue to grow as an alternative investment for accredited investors.

“A lot of people still don’t know about the potential benefits of the 1031 DST syndication structure. Last year, we helped our clients complete more than $600 million of equity investments in these 1031 DST vehicles,” explained Dwight Kay, the founder and CEO of Kay Properties who is a prolific author on the subject including authoring multiple white papers and what some consider to be the first book ever published on the subject.

What is Syndication and How Does it Work within the Real Estate Investment Arena

Generally speaking, syndication is the process of organizing a group of individual investors or an organization for the purpose of collectively investing in an asset that requires a significant amount of capital. When applied to the world of real estate investments, syndication refers to the process of organizing a collection of investors to combine their financial resources in order to purchase one or more real estate assets. Real estate syndication means investors are issued beneficial interests or shares of real estate. Profits and losses are usually split according to their respective percentage ownership interests.

The concept of syndication is especially relevant when discussing Delaware Statutory Trusts because not only do DSTs qualify for 1031 exchanges as outlined in Revenue Ruling 2004-86 of the Internal Revenue Code Traditional 1031 exchanges often involve a sole investor exchanging investment real estate into another like-kind real estate asset. A Delaware Statutory Trust 1031 exchange allows multiple investors to own real estate for their 1031 exchange or cash investments. In addition, unlike other group investment structures such as Tenant in commons (TICs) which limit the number of investors to 35, DSTs allow for a much higher number of investors (typically up to 499 investors), creating an ideal choice for investors who want to access larger and potentially more diverse real estate assets.

What are the Benefits of a Delaware Statutory Trust Syndication?

Benefit #1: Passive Ownership

One of the most attractive aspects of DST 1031 exchange investments to many investors is that they eliminate the challenges associated with active ownership and management. In DST investments, a sponsor creates the DST and has the responsibility of managing the entire business and assets of the trust. These responsibilities can include the following:

Underwriting the real estate deal
Conducting all the due diligence on the property (ies)
Arranging the necessary financing – although some DST 1031 investments are debt free with no loans on them
Creating a business plan for the property (ies)
Finding a property management team.
Coordinating investor relations and potential monthly distribution checks to investors.
In this way, the Delaware Statutory Trust syndication provides investors a passive ownership structure.

According to Kay, in exchange for giving up active management, the passive investor of a DST 1031 property will typically receive 100 percent of the pro-rata portion of any potential principal pay-down from the loan on the property, thereby potentially building equity. In addition, DST 1031 properties are structured so that the investors in the DST receive 100 percent of their pro-rata portion of the potential rental income generated by the property’s tenants.

“Furthermore, although appreciation is never guaranteed, DST 1031 investors receive 100 percent of their pro-rata portion of any potential net appreciation of the property over the hold period,” said Kay.

Benefit #2: Access to Larger, Institutional Grade Assets

Another attractive element for investors of syndicated Delaware Statutory Trust 1031 exchanges is that they provide investors within the trust the opportunity to access large, institutional grade real estate assets that would otherwise potentially be outside of an individual investor’s price point. With a typical investment minimum investment of $100,000, individual investors in a DST can purchase an ownership interest in large industrial distribution centers, medical buildings, self-storage facilities, and even large $50 million-plus apartment communities. In this way, the syndication structure of Delaware Statutory Trust 1031 exchanges allows investors to access a level of real estate that they oftentimes would not have been able to buy before.

Benefit #3: The Potential to Reduce Risk Through Greater Diversification*

A third advantage of the Delaware Statutory Trust syndication structure compared to a normal 1031 exchange is that it increases the ability of investors to invest in multiple properties, thus potentially reducing individual risk. Beyond the ability to allow investors to participate in multiple investment properties, DST syndications also allow investors to invest in multiple asset classes (multifamily, commercial buildings, self-storage, medical facilities, industrial distribution centers, etc.) as well as in multiple geographic locations. Portfolio optimization and diversification was first recognized by Nobel-Prize winning economist Harry Markowitz, and continues to be one of the most proven economic theories for success today, including its application in Delaware Statutory Trust 1031 exchanges. * It is important to note however that diversification does not guarantee profits or protection against losses and that investors should read each DST offerings Private Placement Memorandum (PPM) paying attention to the risk factors prior to considering a DST investment.

Obviously, as with all forms of real estate investments, there is an underlying level of risk that investors should be aware of including things like economic downturns, vacancies, tenant repairs, etc.Investors should not invest in DST investments or real estate syndications if they are unable to sustain the loss of their invested principal.

Benefit #4: Ability to Work with and Learn from Syndication Experts

Commercial real estate investing requires years of experience and lots of resources. Even for experienced investors, the ability to source, inspect, underwrite, and close on large institutional properties within a 1031 exchange timeline is often beyond their reach. However, for Delaware Statutory Trust syndications, the investor can work with highly specialized team members at Kay Properties & Investments. Kay Properties is a national Delaware Statutory Trust expert advisory firm. They have created the www.kpi1031.com platform that provides investors access to the marketplace of DSTs from more than 25 different DST sponsor companies. In addition, they have custom DSTs available only to Kay Properties clients and provide investors independent advice on DST sponsor companies as well as full due diligence and vetting on each DST investment.

About Kay Properties and www.kpi1031.com
Kay Properties is a national Delaware Statutory Trust (DST) investment firm. The www.kpi1031.com platform provides access to the marketplace of DSTs from over 25 different sponsor companies, custom DSTs only available to Kay clients, independent advice on DST sponsor companies, full due diligence and vetting on each DST (typically 20-40 DSTs) and a DST secondary market. Kay Properties team members collectively have over 150 years of real estate experience, are licensed in all 50 states, and have participated in over $30 Billion of DST 1031 investments.

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation. There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed.

Why Real Estate Syndication Is Important for Delaware Statutory Trust 1031 Exchange Real Estate Investors - Kay Properties Investments Key Takeaways: How does Delaware Statutory Trust Syndication benefit investors? Why Real Estate Syndication via a DST can potentially reduce risk for investors*? What is the Portfolio Optimization and Diversification Theory? How real estate syndication and DST investments can help investors access l...