Financial Advisor News

Piedmont, CA

Financial Advisor News

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Piedmont, CA

by: ALISON VAN DYKE

FIRST AND MAIN FINANCIAL

(510) 601-1935

Oakland, CA | Piedmont; Updates on Delaware Statutory Trusts for 1031 Exchanges

Hi, I’m Erik Wolfers, I’m the founder and managing member of First & Main Financial. We’ve been helping clients with perfectly personalized financial solutions since 2001.

Most times people come to us initially it’s for a financial plan—which is a comprehensive review of their financial situation that includes a lifetime cash flow calculation and an analysis on all facets of someone’s financial life—whatever it is they’re interested in. Whatever the details of their life, whether it’s stock options or investment properties or sending their kids to school, to a private K through 12, private college, public college, early retirement, home purchase, home sale, there is a lot that can potentially go into a plan—everybody is different.

We have been having more demand recently for a service that we’ve done for a few of our clients, which is to 1031 exchange assets out of individually held investment property into a Delaware Statutory Trust—we’ve spoken about this a little bit previously. A Delaware Statutory Trust is an illiquid, approved passive vehicle for 1031 exchanges, so that you can defer your capital gains on a long-held profitable investment property. There seems to be a lot of interest in doing 1031 exchanges out of individually held investment properties these days, it just keeps coming up for us—and for the first time ever recently, somebody came to me specifically for this.

The DST marketplace has evolved somewhat since the start of the pandemic. Many of the Delaware Statutory Trust that are available now are producing lower yield—below 4%, maybe a little bit above 4%, where as they used to be 5%, maybe a little bit above 5%. The one that we talk to our clients about most often produces 6%, or a little bit more than 6%, and because of that stronger yield as well as the diversification built into that particular trust, demand has skyrocketed. So for the last trust there was a lot more money that wanted to get into it then was available.

We’re talking with a client right now about considering the alternative of selling a property and then buying a Triple Net Lease opportunity—so that would mean buying something like a Starbucks or a Burger King, and leasing the land and building to the corporation. Those have also been around a really long time. We don’t do that work nor are we experts in that, but if that’s a better option for the client then we’re perfectly happy for the client to go that route.

There are risks—positive aspects and negative aspects to an individually owned Triple Net lease Property or a Delaware Statutory Trust. But there seems to be tremendous amounts of demand, and they are a fantastic way of deferring capital gains taxes and generating income. If you buy into Delaware Statutory Trust, you can keep your money in one of these trusts through switching over time— or there are also what are called UPREIT (Real Estate Investment Trust) Structures. You sell your trust assets into a REIT, maintain your tax deferred status in that sense, and then have a permanent asset as opposed to having to switch at the end of the life of a Delaware Statutory Trust. Delaware statutory trust by rule from the IRS have to have a maximum life of 10 years.

There’s a lot happening and the marketplace has changed somewhat—not necessarily for the better—but it is still a good solution for some people. We’re happy to talk to you about 1031s and DSTs, and we can refer you to somebody who is an expert in other types 1031s—if we’re not the right people for the job, then we’re happy to refer you to someone else.

If you are looking for some financial guidance; whether for a one time financial plan or continuing advice on your investments, we invite you to meet with a First & Main Financial planner for a free consultation. We would be more than happy to sit down with you, assess your situation and review our services to help navigate your financial future.

Recent

“Best Financial Advisor in Piedmont, CA”

Top Rated Local Financial Advisor / Planner

East Bay Area: Piedmont, Oakland, Berkeley, Alameda, Orinda, CA

Recent

“Best Financial Advisor in Piedmont, CA”

Top Rated Local Financial Advisor / Planner

East Bay Area: Piedmont, Oakland, Berkeley, Alameda, Orinda, CA

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