What is a 1031 exchange?
3 Fundamental Qualifications
Reinvest The Proceeds Into A Like-kind Investment. Doing this would defer paying capital gain taxes. For example an investor can exchange a commercial property for another, or a residential rental property for a commercial property, and vice versa.
All Proceeds Must Be Reinvested. The value of the replacement property must be equal to or greater than the value of the relinquished property to qualify for full deferral of capital gain taxes.
Titles Must Be Identical. The ownership title for the replacement property must be identical to the title for the relinquished property.
What are the identification rules?
(WITHIN 45 DAYS FROM CLOSING THE RELINQUISHED PROPERTY)
You can identify an unlimited number of replacement properties, as long as the total fair market value of all properties does not exceed 200% of the value of the relinquished property.
3 Property rule
You can identify up to three different properties regardless of the total fair market value of the properties and you may acquire one, two or all three of these properties.
You can identify more than 3 properties with total value more than 200% of the value of the relinquished property but you must acquire at least 95% of the value of properties identified.
Zero Landlord Responsibility
No Management Required
With single tenant triple net lease the tenant is responsible for ALL property expenses that normally would be paid by property owner (landlord). These include property taxes, insurance, utilities, repairs and maintenance.
In effect the landlord has ZERO responsibility in managing the property. This setup has NO management headache vs. management overhead usually associated other asset types. For net lease investors this greatly empowers peace-of-mind and freedom in their passive investment.
Long Term Leases
Predictable Cash Flow
National Credit Tenant
Triple net leases generally are longer-term leases from 10 to 25 years. These leases can have up to several renewal options bringing total lease periods of 30 to 50+ years. There can be rent increases built-in during the base lease term and in option years. Single tenant net lease investment is also referred to as Mailbox Money due to its bond-like revenue streams and predictable, stable returns.
National retail tenants such as Walgreens, CVS, 7-Eleven, Dollar General, Burger King, Wendy's, Davita, and other expanding brands such as Chipotle, Chick-fil-A, and Church's Chicken have various forms of corporate, franchisee and/or personal lease guarantee. While no investments are completely risk-free, with well-thought-out execution investors can enjoy predictable and passive monthly rental income streams for a very long time.