Hypothetical Case Study: Tired of Encroaching Rent Control Regulations, Investor Turns to Kay Properties & Investments to Help Build a Diversified DST 1031 Exchange Strategy

Tom quickly recognized he needed to complete a 1031 exchange to help defer taxes and find a replacement property that would require less hands-on management.

Tom at first considered a NNN property as an option for his 1031 exchange. Tom quickly realized he did not want to put such a large amount of capital into a single NNN property. Tom always remembered his grandmother using the expression, "never keep all your eggs in one basket". Placing most of his net worth into a single NNN property would put Tom in a precarious position especially if the tenant “went dark” as the properties value would be negatively impacted as well as his monthly rental payments would cease. He needed a strategy that would spread risk across multiple investments.

Tom also didn’t want to purchase more apartment buildings. He would then have to continue to manage them as well as be subject to rent control restrictions. He thought about buying apartments out of state but then quickly realized that managing a management company would likely be worse than just doing the work himself.

Tom quickly recognized he needed to complete a 1031 exchange to help defer taxes and find a replacement property that would require less hands-on management.

Tom at first considered a NNN property as an option for his 1031 exchange. Tom quickly realized he did not want to put such a large amount of capital into a single NNN property. Tom always remembered his grandmother using the expression, "never keep all your eggs in one basket". Placing most of his net worth into a single NNN property would put Tom in a precarious position especially if the tenant “went dark” as the properties value would be negatively impacted as well as his monthly rental payments would cease. He needed a strategy that would spread risk across multiple investments.

Tom also didn’t want to purchase more apartment buildings. He would then have to continue to manage them as well as be subject to rent control restrictions. He thought about buying apartments out of state but then quickly realized that managing a management company would likely be worse than just doing the work himself.

After telling his CPA he was not interested in a NNN property or other apartments, Tom’s CPA recommended that he look closer into Delaware Statutory Trusts (DSTs) for his 1031 exchange and was advised by his CPA to contact Kay Properties & Investments.

After presenting a thorough overview of the Delaware Statutory Trust structure – including both benefits and risks, conducting a comprehensive review of Tom’s needs, and accessing the www.kpi1031.com online marketplace that features more than 40 DST offerings from over 25 different sponsor firms, the Kay Properties Team of 1031 exchange experts crafted a tailored real estate portfolio solution to potentially meet his goals of passive income, diversification, and risk mitigation.

This plan involved him placing the entire $5 million equity into multiple debt-free Delaware Statutory Trust properties to achieve tax deferral, risk mitigation, passive management, and diversification. Although diversification does not guarantee profits or protection against losses, Tom felt good that his $5 million was spread out amongst multiple properties, asset classes, locations and tenants. By spreading his investment across multiple asset classes and locations, Tom achieved a level of diversification that significantly reduced reliance on any single property or tenant. Additionally, the portfolio was entirely debt-free, eliminating the risk of lender foreclosure or cash flow sweeps.

Thanks to the DST solution provided by Kay Properties & Investments, Tom transitioned from intensive active property management into truly passive investing. The predictable income stream from his diversified DST portfolio supports his retirement lifestyle while freeing him from the stress of hands-on management and equity squeezing rent control regulations.^{*Diversification does not guarantee profits or protection from losses.}

Tom now enjoys the flexibility and freedom he worked so hard to achieve, knowing that his investment portfolio is designed to align with his financial goals and risk tolerance through the 1031 exchange into Delaware Statutory Trust investments and the www.kpi1031.com marketplace platform. Tom was thankful for the Kay Properties team helping to educate him throughout this experience.