Tax Deferral Secrets for Real Estate Investors: What You Need to Know

In this episode of "Real Deal Investing", hosts Jerron Kelley, a seasoned real estate attorney, and Larry Mastropieri, a real estate broker and agent, talk with Bryan Cogliano.

Bryan focuses on investment strategies involving Delaware Statutory Trusts (DSTs) and 1031 exchanges, emphasizing the importance of tax deferral and informed decision-making for real estate investors.

Bryan begins by addressing common dilemmas faced by investors, particularly those who feel stuck between selling their properties or continuing to manage them. With limited supply, many investors are finding premium prices for their properties, leading them to sell while preserving tax advantages and maintaining flexibility for future investments.

A key point is the varying hold times for DSTs, with one sponsor targeting a three-year hold, although the standard industry practice tends to be five to six years. Market conditions can influence these hold times significantly. For instance, a Florida multifamily development achieved a favorable offer after just three years, allowing investors to earn over a 20% internal rate of return (IRR). Conversely, in a different scenario, investors may find themselves waiting longer if market conditions are not conducive to selling.

Bryan also delves into the fees associated with 1031 exchanges, noting that intermediary services typically cost between $750 and a few thousand dollars. Importantly, investors often don’t incur out-of-pocket expenses for advisory services, as compensation usually comes from the sponsor companies. Professionals in the field emphasize their role in adding value through referrals and expertise, helping clients navigate complex transactions and avoid substantial tax liabilities.

Finally, the conversation underscores the necessity of understanding tax-saving opportunities and the complexities of real estate investments. It highlights the importance of building strong client relationships based on value, knowledge, and effective communication, ensuring that investors are well-equipped to make informed decisions regarding their financial futures.