Can I invest in an apartment syndication using a 1031, because I’ve been told no in the past?
Description: An outline of the process of how to invest your 1031 exchange money into a real estate syndication
Well if you have been told no there would be 2 reasons for that. One the operator has no experience doing 1031’s and they may not be aware that you can do them. Or you might not have enough in your 1031 rollover to make it possible to structure their deal to accommodate you. Syndications are usually structured as an LLC and investors buy shares in the LLC syndication. That structure is NOT compliant with a 1031 as the 1031 exchange investor need to own the property itself not the shares. There are many other rules that the syndicator needs to abide by that make the investment much more labor intensive than the usually structure. To accommodate the 1031 investor the syndication must be structured as a TIC, no that doesn’t refer to a blood sucking bug it means Tenant In Common. A tenant in common means ownership in which 2 or more people/ entities own separate shares of the same real property. Each person holds an individual UNDIVIDED ownership interest in the project.
The cool thing about that is once the project is finished and you would like to again roll over your profits into another 1031 exchange into a larger project you can easily do this again and again. That is what the wealthy to defer their tax liability again and again, building up significant wealth. So as I mentioned before this is much more labor intensive for the management team to run a project that is set up this way so for our company you need to have at least 500k in your exchange to participate in our projects.