March 25, 2016
SAN DIEGO – Making sure that an investor has a significant tax problem before entering into a 1031 Exchange is just one thing to look for before you leap, says ExchangeRight’s Joshua Ungerecht in a panel session during ADISA’s Spring Symposium Tuesday. Panelists in the “1031 Replacement Property Due Diligence and DST Evaluation” session spoke to attendees about the due diligence necessary for DST and TIC deals.
Moderator Louis Rogers with Capital Square Realty Advisors said advisors have to earn back the load to break even on these deals, and Bill Lowell of Lowell & Co. said, “We want our money back—we do whatever we can to make that happen and we do due diligence on sponsors.”
Ungerecht said looking at the viability of a deal’s assumptions and seeing if it matches with reality is important. “Have they left room for anything to go wrong? What are the assumptions baked into the deal, and do they fall in line with reality?”
Nati Kiferbaum with Inland Private Capital Corp. said, “We try to pay down debt and play in a moderate-leverage arena” to remain stable.
Michael Miller, case planner and due-diligence officer for SGMA Financial Corp. and Parkland Securities LLC, noted that many multifamily offerings involve value add, so expenses will go up. He agreed with Ungerecht that you need to look at the assumptions to make sure they’re reasonable.
Rogers asked what the compliance responsibilities are to selling real estate, and Lowell stressed the importance of diversification. Ungerecht pointed out the advisor’s responsibility to make sure that the investor truly has a significant tax problem before entering into a 1031 Exchange that’s illiquid.