Real Estate is a unique investment in several ways. One of the more lucrative benefits is the ability to sell for a profit without immediately paying on the gain tax.

Savvy investors have known for years the compounding power of reinvesting the "taxed" amount into new properties. These reinvestments are allowed through a provision in the Internal Revenue Code sec 1031.

While there exists several creative ways to exchange properties through 1031's the objective is always the same - to defer paying taxes.

The basics of an exchange involve the surrender of a property into another of equal or greater value. A qualified property is one that is held for investment. Upon sale of that property the owner, in lieu of paying tax, may defer by replacing it with a like kind property.

Like kind means property that will be held for investment. The physical nature, location and general type are not factors as long as they qualify as replacement property. (example A 4 family in Green Bay can be exchanged for vacant land in Florida) The replacement property MUST be held for investment or the exchange will be disqualified.

As quality local investments become increasingly difficult to locate, identify and "institutional" real estate is rarely local nor affordable, new strategies have evolved to accommodate the average real estate investor.

Group investment, or partnering, is not a new concept but in the past was mainly done by development type groups for the completion of projects.

Because of the large capital requirements of current investments and a switch in paradigm to over capitalize (vs over leverage) investments have opened the way for non-developer investors to take substantial interest in real property while maintaining a passive role.

Seidl & Associates has formed several of these investment groups over the years and constantly seeks new opportunities for investors. (This is not a solicitation) email me if you would like to discuss this issue.

New to the investment arena is Tenant in Common Properties. Known as TIC's, these are institutional investment grade properties of large magnitudes. Since the IRS published a Revenue Proclamation in 2002 (Rev. Proc. 2002-22), the TIC industry has boomed. The industry is producing billions of transactions annually. The significance of the IRS letter is it allowed investors to exchange their current property for a Tenant in common interest in another.

Primarily, TIC properties are acquired by sponsors who then "sell off" shares in the investment to 3^rd parties. As mentioned above, these types of property are large institutional investments usually purchased by large corporate and capital groups.

The job of the sponsor of the "offering" is to raise the investment capital in relatively small increments. Those investment increments usually run from as little as $100,000 to much more.

Unfortunately, as the industry grows, so does the number of sponsors. As the number of sponsors grows the competition among them to locate "investment" real estate may create some inequities between them. Presently there are scores of sponsors and identifying the good ones is a task. There are no qualified TIC sponsors in the Green Bay area taking familiarity out of the equation.

Seidl & Associates strategy to date is to rely on the CCIM and SIOR networks when researching properties and sponsors. These nation-wide commercial professionals are stewards of their market and are quick to render their professional courtesy opinions on the properties and integrity of the sponsor. The concept of a non-local real estate investment should be no more intimidating than investing in the stock market.

The benefit for investors, though, is you can exchange into a TIC and you can exchange out of it, thereby continuing to postpone payment of capital gain tax.

Baby Boomers heading toward retirement are primary candidates for the TIC structure. After years of property ownership, trading the equity in the investment is fairly seamless and rids landlords of the nasty 3T's - Trash, toilets and tenants in exchange for the desirable 2T's - Time and Travel.

All of the benefits of ownership remain in a TIC property- cash flow, appreciation and tax benefits. The fractional interest owned still allows depreciation (dependent on individual basis) and other deductions relative to the investment (consult your tax advisor on this subject).

Below, we have featured a few of our favorite links for more information. These links are for your convenience and do not represent an endorsement.