Written By:
Louis A. Tucci Managing Director L. Tucci Financial LLC In addition to fueling the recent bid ask spreads that has led to a drop in available properties, higher interest rates and tighter lending have also caused unintended complications to 1031 exchanges. When an investor is looking at replacement properties, they must replace the sale price. Given the example if a seller sold their property for $1m with 50% LTV they must replace the $1m when they purchase the replacement property. In the case of a seller who is considering a DST with 45% debt, they must either come up with the difference in cash or pay tax on the boot. In the last 6 months we have seen many DST sponsor syndicate DST’s well under 50% LTV whereby a year ago we were still seeing 60% LTV. Another observation which is becoming a trend of sorts, is sellers are having to hold a note (seller financing) because the buyer cannot secure enough debt due to tighter lending by institutions. When a seller holds a note, it potentially could cause the entire value of note to become a taxable boot. For sellers to have the best chance to have a successful 1031, engaging in conversation with qualified professionals prior to sitting at the closing table will only increase their chances of a positive outcome. CIANJ member, Louis Tucci, currently serves as the Managing Director at L. Tucci Financial LLC. Using his business experience, Louis endeavors to help others achieve their financial independence. He can be reached at 201-291-2672 or [email protected] Disclosure: Louis A. Tucci is a Registered Representative of Coastal Equities, Inc. and an Investment Advisory Representative of Coastal Investment Advisors, Inc. Neither Coastal Equities, Inc. nor Coastal Investment Advisors, Inc. is affiliated with L. Tucci Financial, LLC. Investment Advisory Services are offered through Coastal Investment Advisors, Inc., and securities are offered through Coastal Equities, Inc., Member FINRA/SIPC, co-located at 1201 N. Orange St., Suite 729, Wilmington, DE 19801. Coastal and CoastalOne are trade names for the Coastal Companies. The Coastal Companies are Coastal Equities, Inc. Coastal Investment Advisors, Inc. a US SEC Registered Investment Adviser and Coastal Insurance Services, which consist of several affiliated insurance agencies, co-located at 1201 N Orange St., Suite 729 Wilmington DE 19801
0 Comments
Leave a Reply. |
Guest Blog
Archives
July 2024
Categories |