Access to Institutional Grade Investment Properties
A securitized real estate investment presents the opportunity for an individual to join together with other accredited investors to own investment-grade real estate with financially secure, creditworthy tenants under the long-term triple net (NNN) leases and professional management that none of them could own individually. Available asset classes include:
- Multifamily Housing
- NNN Retail Properties
- Office Buildings
- Industrial complexes and warehouses
A Truly Passive Investment
While real estate is typically associated with the burdens of property management and oversight, the investments that we offer are fully managed and overseen by the sponsor and/or property manager so that the investor enjoys a truly passive investment, responsible only for cashing the net rental payment check each month (or arranging for direct deposit).
These management companies have a vested interest in the performance of the property and typically have strong historical track records with many other properties.
A securitized real estate investment eliminates the headaches and time-consuming burdens of active property management, and is specifically designed to be a solution for investors with rental properties who wish to retire from the daily burdens and liabilities that come with being a landlord.
Such an investment is also perfect for professionals who are dedicated to their career but still desire to build a well-diversified real estate portfolio with current income and strong appreciation potential. Combined with the 1031 exchange process, such a portfolio can grow tax-deferred through the course of the investor’s career.
Income, Pay-down of loan principal as a percent of equity invested, and Appreciation
Investment-grade properties typically enjoy stable cash flow from rental income which can be paid monthly or quarterly. In addition, as the debt is serviced, the investor equity in the property increases even if the actual value of the property remains constant. Finally, there is the potential for appreciation in the value of the property realized at the time of sale.
Tax-Sheltered Cash Flow
Unlike income from non-real estate investments, a significant portion of the cash flow from these investments can be tax-sheltered due to depreciation pass-through and interest deductions. And if an investor has held a property for so long that their depreciation deductions have either run out, or will do so soon, a 1031 exchange offers the opportunity to restore these deductions in a replacement property.
This opportunity arises when the DST/TIC offers a greater amount of debt than the debt on the investor’s relinquished property. The additional debt becomes a new tax basis to the investor, which can provide for greater depreciation expense to shelter rental income from federal and state taxes. Many DST/TIC properties are leveraged with 50%-75% non-recourse debt financing.
With minimum investment requirements as low as $25,000 (typically $100,000 for a 1031 exchange), investors can now hedge risk by diversifying their real estate portfolio to include multiple properties in different geographic locations, as well as in different sectors such as residential apartment complexes, retail shopping centers, office buildings, and industrial parks.
Given the traditional benefits of real estate and the full disclosure of a security, not to mention tax deferral if in the context of a 1031 exchange, we believe a securitized real estate investment is an attractive option for those contemplating retirement, as well as for those building up a diversified investment portfolio.