Just because an investment is fundamentally sound or offers a positive return, doesn’t necessarily make it a good one. There’s an element of “fit” that must be considered any time a potential investment is evaluated. From time horizon to risk tolerance, return expectations, and income requirements, every investor has different needs, and the key to finding a good investment is to find one that meets most or all of those needs. For a certain segment of the investing public, an investment in a Delaware Statutory Trust has the potential to be a good fit and is worthy of consideration. What is a DST? A Delaware Statutory Trust is a “legally recognized entity that is set up for the purpose of conducting business. They are formed using a private trust agreement under which real property is held, managed, invested, administered, and/or operated for the purpose of profit.” Translated casually, a DST is a corporate entity, set up for the purpose of acquiring a specific real estate asset. Potential investors purchase shares in the entity, which entitle them to a proportionate share of the potential cash flow and profits produced by the underlying asset. Pros and Cons of Investing in a DST Like any investment, there are pros and cons to consider when evaluating a DST opportunity. On the positive side, DSTs provide individual investors with a passive investment opportunity in institutional quality assets that they wouldn’t otherwise be able to invest in. It’s passive because the properties are managed by institutional-quality property management with significant experience and a favorable track record. Additionally, DSTs are available in all asset classes, including some of the most popular ones like multifamily, industrial, and office and they can be used as a useful estate planning tool. Lastly, and maybe most importantly, DSTs can provide significant tax benefits when purchased in conjunction with a 1031 exchange . While the DST benefits are impressive, there are some downsides to consider. To start, DSTs are illiquid. They require a holding period of 5-10 years and the market can change significantly over that time. In addition, DST’s can’t raise new capital once they’re closed, which means that: (1) the properties require higher than usual reserves; and (2) an unexpectedly large capital expenditure like a new roof can erode years of profits. Further, DST investors have no say in property management decisions. They’re passive investors only and will almost certainly come out on the losing side of a dispute with the property manager. As these are just some of the cons to consider, investors should ensure they are familiar with all risks before investing. Between the pros and cons, there’s a lot to consider, which brings us back to the idea of “fit.” What Types of Investors are DST s a Good Fit For? Generally speaking, an investment in a DST may be a good fit for an individual that falls into one or more of the following categories: 1. Individuals seeking to be passively involved with their investment 2. Individuals looking for exposure to institutional quality assets with professional management 3. Individuals who have experienced a recent gain on the sale of an asset and are looking to defer the gain from taxes 4. Income investors with a 5-10 year time horizon Who are these individuals? For the most part, they may be, but are not limited to, business owners, successful investors, executives, doctors, lawyers, and accountants who tend to be a little bit older and established in their careers. Do You Think a DST Might be a Good Fit for You? I specialize in helping my clients identify and select real estate investments, including DSTs, that are suitable for their risk tolerance and time horizon. I’d like to invite you to set an appointment or to attend our next seminar. You can do so by calling me at 650-282-0477 or by sending an email to amit@get1031properties.com I look forward to hearing from you. This is for informational purposed only and does not constitute an offer to buy or sell any securitized real estate investments. There are risks associated with investing in Delaware Statutory Trust (DST) and real estate investment properties including, but not limited to, loss of entire principal, declining market value, tenant vacancies and illiquidity. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This information is not meant to be interpreted as tax or legal advice. Please speak with your legal and tax advisers for guidance regarding your particular situation. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC.

Delaware Statutory Trusts: Who Should Invest? Just because an investment is fundamentally sound or offers a positive return, doesn’t necessarily make it a good one. There’s an element of “fit” that must be considered any time a potential investment is evaluated.

Many Bay Area real estate investors I speak with tell me, "Amit, I want to sell my investment property, but where would I exchange my proceeds into?" I've been working with real estate investors for many years, and I understand their dilemma. Where can Bay Area real estate investors find properties that provide more cash flow potential and aren't management-intensive within the dreaded 45-day identification period that goes by far too fast? To help navigate the identification process and understand which properties are eligible and meet your investment and lifestyle goals, real estate investors should keep their options open. Think broadly when considering a property for your 1031 exchange . Fortunately, the IRS doesn't consider "like-kind property" to be nearly as restrictive as it sounds. Investors can select from apartment buildings, industrial properties, office buildings, shopping centers, single-family home rentals, Delaware Statutory Trusts , and Single Tenant Net Leased Properties, for example. Each property type has its unique advantages and disadvantages. From an investment standpoint, they may seem like they're from different universes. When it comes to 1031 Exchanges, there's no requirement that a single-family rental property must be exchanged for another single-family home. Instead, an investor can trade a single-family home for an apartment building, raw land, or a Delaware Statutory Trust. Investors may have their sights set on a particular property type when commencing the sale of their investment property, but I believe this is an excellent opportunity to broaden your horizons and dig deeper into different types of property to diversify your portfolio. For 1031 exchange reinvestment, the IRS has laid out specific guidelines on which properties you can consider. First and foremost, your primary residence cannot be used for 1031 exchange reinvestment (unless you convert your property into a rental property - download 5-Steps to convert your primary home to a rental property for maximum tax benefits ). Only properties used for business or investment qualify as "like-kind" for 1031 exchange. There are four things to consider when identifying replacement property: Personal Time • Do investors want properties that provide more margin in their personal life, such as more time with family, traveling or other goals? • Are there parts of managing rental properties that owners enjoy or don't enjoy? Such as value-add projects, tenant relationships, routine maintenance, and/or management? Regulation • Where do property owners anticipate housing regulations to be in the next one or two years? • What is currently proposed in the state your property is located? And how do these new laws affect property owners' ability to effectively manage their property while meeting their income and lifestyle goals? Risk • What is the property owner's investment risk and how has it changed? • Is all the equity tied up in one property, geography, or asset-class? • How do rental property owners view liability risk (e.g. tenant risk, lawsuit risk, etc.) associated with our current rental property portfolio? • How do we mitigate the risk? Income • How much income is the property currently earning, and how much would the owner like to own in order to maintain their lifestyle? • Are there any anticipated changes for more income in the future? Key takeaways The 1031 exchange is a tool used by savvy real estate investors to take full advantage of the tax code, leverage, and potential cash flow benefits that investment real estate may provide. Because the execution and nuances of 1031 exchanges can get quite complex, investors new to real estate or the like-kind exchange process should contact qualified tax and real estate professionals to be sure an exchange is properly executed. Are you interested in learning more? I specialize in helping my clients identify and select DSTs suitable for their risk tolerance and time horizon. If you are interested in learning more about DST investment opportunities , I'd like to invite you to set an appointment or attend our next webinar. You can do so by calling me at 650-282-0477 or by sending an email to amit@get1031properties.com. This is for informational purposed only and does not constitute an offer to buy or sell any securitized real estate investments. There are material risks associated with investing in real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This information is not meant to be interpreted as tax or legal advice. Please speak with your legal and tax advisors for guidance regarding your particular situation. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Get1031Properties is independent of CIS.

From income to price appreciation, a real estate investment is chock full of potential benefits related to appreciation. However, one of the most commonly overlooked, but equally as powerful, benefits is the favorable tax treatment created through depreciation. What is Depreciation? Just like any tangible asset, real estate tends to degrade over time. What was once a gleaming new property will slowly wear out, succumbing to things like weather, changing tastes, and degradation of major systems like HVAC, Electrical, and Plumbing. To account for this, the accounting rules that govern real estate allow for a gradual reduction in the value of the property in a process known as depreciation. Officially, depreciation is defined as the accounting method of allocating the cost of a tangible asset over its life expectancy. It represents how much of an asset’s value has been used up and is found as a line item on the income statement. , (1,2) Why It Matters Depreciation is beneficial because it’s recorded as an expense line item on the income statement, even though it doesn’t represent cash out of the owner’s pocket. Expensing depreciation reduces the taxable income of the property, creating a smaller tax bill in the process. Consider the following example: Property #1 - No Depreciation Property #2 - Depreciation Income $100,000 Income $100,000 Taxes $20,000 Taxes $20,000 Insurance $8,000 Insurance $8,000 Utilities $12,000 Utilities $12,000 Depreciation $10,000 Total Expenses $40,000 Total Expenses $50,000 Net Operating Income $60,000 Net Operating Income $50,000 Both properties have the same amount of income, but property #2 lists $10K in depreciation on the income statement. As a result, the taxable income is reduced by $10K. Assuming a tax rate of 25%, expensing depreciation results in a tax savings of $2,500. Perhaps this is an oversimplified example, but the savings can be significant on a larger scale. Calculating Depreciation With the benefit of depreciation established, the question becomes, “how is the annual depreciation amount calculated?” To answer the question, three inputs are required: ➢ Cost Basis: The Cost Basis establishes the starting point for expensing depreciation. More often than not, it’s the purchase price of the asset. ➢ Useful Life: The Useful Life is an estimate of the property’s functional lifespan. Per IRS rules, there are some required standards, but a safe estimate is 27.5 years for residential property and 39 years for commercial. (3) ➢ Depreciation Method: Per IRS guidelines, there are multiple allowable methods to depreciate a property, but the most common is the “straight line” method, which divides the cost basis by the property’s useful life. (1) Let’s put these inputs to work in an example. Assume a property with a $1MM purchase price, 39-year useful life, and straight-line depreciation method. In this scenario, the annual allowable depreciation would be $25,641 ($1MM/39). So, for every year an investor owns the property, they’ll be allowed to record this amount in depreciation expense, thereby reducing their taxable income. While this is great, there’s a hidden cost to be aware of. Depreciation Recapture If an investor has owned a property for a significant amount of time before selling it, there’s a hidden tax known as “Depreciation Recapture,” which is the tax that must be paid on the difference between the property’s sales price and cost basis. Using the same example from above, let’s assume the same investor who purchased the property for $1MM is going to sell it after their 10-year holding period. If $1MM was starting point and $25,641 in depreciation was taken annually, then the property’s cost basis at the end of 10 years is $743,590 (($1,000,000) - ($25,641*10)). Let’s also assume that at the end of the 10-year holding period, the property was sold for $1.2MM. Upon sale, the investor must pay taxes on the difference between the cost basis of the property ($743,590) and the sales price ($1,200,000). Assuming a 25% tax rate, taxes on the sale are going to be $114M. This can be a surprise for investors if it isn’t planned for and slightly offsets the benefits of expensing depreciation. What to Do When Depreciation Runs Out If a property has been held long enough for its cost basis to be reduced to $0, there may be a uniquely large tax bill associated with its disposition. In addition, the owner will no longer be able to reap the tax benefits of additional depreciation. So, they’ll likely consider doing one of three things: ➢ Nothing: An investor may choose to do nothing, which is fine, but their return on the property would likely be reduced since they’re no longer reaping the benefits of the depreciation expense. ➢ Sell The Property: The investor can dispose of the asset, but would face a hefty depreciation recapture tax in doing so. ➢ Exchange the property: Using a 1031 Exchange , an investor may sell the property and use the proceeds to buy a new property in a process known as a 1031 exchange. This option has two major benefits: (1) Taxes are deferred on the sale as long as the proceeds are invested into a property of “like kind;” and (2) The owner can start the depreciation process on the new property all over again. Summary & Conclusions Because it isn’t associated with direct returns on an investment, depreciation is an often overlooked benefit to real estate investing due to potential tax savings. To take advantage of it, it’s important to know the basics and to work with a qualified CPA to ensure that all required taxes are paid and that all allowable depreciation is taken. But, if a property is held for a long period of time, it’s important to account for the depreciation recapture tax, which can often catch investors by surprise and unprepared to pay it when the property is sold. I specialize in helping my clients identify and select 1031 Exchange properties or DST properties that are suitable for their risk tolerance and time horizon. If you are interested in learning more about replacement options and/or DST investment opportunities , I’d like to invite you to set an appointment or to attend our next seminar. You can do so by calling me at 650-282-0477 or by sending an email at amit@Get1031Properties.com. ______________________________________________________________________________ (1) Accounting rules allow for depreciation on the structure and improvements only. Not land. (2) Not to be taken as accounting advice. Always consult a qualified CPA who can provide advice relevant to your unique situation. (3) Always consult a CPA This is informational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. Hypothetical examples are for illustration purposes only and individual results will very. There are risks associated with investing in real estate and Delaware Statutory Trust (DST) properties including, but not limited to, loss of entire investment principal, declining market values, tenant vacancies and illiquidity. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Get 1031 Properties is independent of CIS.

A rental property can be an incredibly valuable investment. While that’s a good thing, it also means that you have a lot of financial value and work tied up into one property. Your property — and your own financial security — could be at risk. Ideally, most of the time things will be fine. The weather will be calm, your property will be treated well, nothing pernicious will happen on your property, and your tenants will be pleasant people who are neat and quick to let you know if you need to fix a leak or take care of a pest problem. Unfortunately, sometimes you won’t be so lucky. What if a natural disaster strikes? What if your property starts losing money? What if your tenants don’t cooperate with you? Here’s how to protect your investment in your rental property. Landlord insurance Though not legally required, landlord insurance is all but mandatory for those who own rental properties. A rental property is something that is simply too valuable to leave unprotected. Threats like natural disasters and break-ins could destroy your property and the value that you’ve invested in it. If you don’t have an insurance policy, the costs of making things right again will have to come out of your pocket — you may even have to give up and sell the property at a major loss. Make sure that you have landlord insurance and that your policy is comprehensive. Preventative maintenance Like any other architectural structure, a rental home or apartment building will wear down over time. That’s to be expected, but be careful: Neglecting maintenance and failing to make speedy fixes to things in need of repair will accelerate this process, causing your property to become less profitable and less valuable. Here’s the smart move: Team up with contractors or a building management company and invest heavily in preventative maintenance. Preventative maintenance is usually cheaper than repair work, and nothing is more expensive than deferred maintenance. Legal protections Owning a rental property means, in effect, that you are running a business. You’ll have expenses, you’ll have revenue (in the form of rent), and — hopefully, anyway — you’ll have profits. Businesses are tricky things, and they need to be set up properly from a legal perspective. This is important in part because your business could, in theory, lose a lot of money. Hopefully, it won’t, but if it does, then you will want your business to be a separate legal entity that insulates you from its losses. An LLC is a popular choice (though by no means the only one — make sure that you discuss all of your options with an attorney). There are a lot of other reasons to set up your business on a solid legal footing, including liability issues and tax advantages. Do yourself a favor: pay a visit to an attorney. It will protect your property and your future financial wellbeing. Tenant screening A lot of things can threaten your rental property. Natural disasters could wreck the structure, maintenance problems could cause the space to deteriorate, and financial problems could cost you the whole enterprise. But there’s one threat that looms particularly large: bad tenants. Tenants are the source of revenue on rental properties, but they can also cause losses. A bad tenant could hurt your property in all sorts of ways, from failing to report a leak until the damage is done to committing crimes on your property. Kicking out bad tenants can be tough, especially in states and cities with powerful protections for renters built into their laws. That’s why it’s important to screen tenants with background checks and credit checks before you let them sign a lease agreement. Fortunately, a lot of great landlord software solutions offer free tenant screening among their other features.