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1031 Crowdfunding: A Solution for Your 1031 Exchange - How it Works

1031 Crowdfunding seeks to offer a simple solution for 1031 exchangers by providing an online marketplace for real estate investors to find, view, and purchase available, investment-grade properties through Delaware Statutory Trusts (DSTs).

If you haven’t become a part of our crowd yet, you might wonder what that means and how that works. Let us explain.

Whether you have been through the 1031 exchange process before or are seeking to learn what is required, here is a summary; you must engage a qualified intermediary to process your transactions. You have to sell your relinquished property, and then identify candidate replacement property/ies within 45 days and acquire at least one of those properties within 180 days. Then you have the responsibility to manage and operate the replacement property to maintain its profitability. As you know, there can be many frustrating obstacles to overcome throughout this process.

That’s why we are here.

We take many of the steps in the 1031 exchange process off of your hands. When the obstacles appear, you don’t deal with them, we do.

Here is a step-by-step process of how a simplified 1031 exchange with 1031 Crowdfunding works:

Step 1:

Sponsors create 1031 exchange-qualified DSTs and acquire high-value, investment-grade real estate assets. Investors do not face competition for desirable properties. Investors do not have to rush to beat Identification or Exchange Period deadlines.

Step 2:

1031 Crowdfunding reviews qualifying DSTs and presents top-class DSTs on its platform. We strongly recommend that investors complete their due diligence efforts to ensure the quality of the candidate DSTs; however, we have already evaluated the DSTs on our platform through a strict due diligence process.

Step 3:

Investors join the crowd by creating an account on 1031Crowdfunding.com. Investors gain convenient access to complete details for a variety of DST listings.

Step 4:

Members browse available DSTs to find the property best suited for their needs. DSTs vary in debt levels, so investors are sure to find a property that satisfies their debt requirements. DST properties differ in property types, regions, and values to meet individual preferences and offer diversification options.

Step 5:

If needed, members contact 1031 Crowdfunding for assistance or answers to questions. The 1031 Crowdfunding team specializes in 1031 exchanges and DSTs. Investors receive the most complete and accurate information regarding exchange options.

Step 6:

Members complete electronic forms to purchase units of beneficial interest in their chosen DST. The property acquisition is processed at the investor’s convenience at the comfort of their personal computer. The investor maintains full control over their investment decisions. If conducting a 1031 exchange, the investor’s qualified intermediary wires the funds to complete the purchase.

Step 7:

As DST beneficiaries, members receive confirmation of the purchase, followed by regular updates and distributions. Expert DST officers and property managers operate and manage the property or portfolio. Investors enjoy the benefits of owning real estate without dealing with the day-to-day responsibilities of actively managing real estate.

Step 8:

DST managers sell the property at the designated time and distribute final proceeds. Investors are now in a position to defer capital gains taxes through a 1031 exchange by replacing this property with a new property. Proceeds are sent to qualified intermediaries of investors who intend to complete a 1031 exchange. Investors now have the option to find a replacement property through 1031 Crowdfunding or other sources.

This material does not constitute an offer to sell or a solicitation of an offer to buy any security. An offer can only be made by a prospectus that contains more complete information on risks, management fees and other expenses. This literature must be accompanied by, and read in conjunction with, a prospectus or private placement memorandum to fully understand the implications and risks of the offering of securities to which it relates. As with all investing, investing in private placements are speculative in nature and involve a degree of risk, including loss of your principal. Past performance is not necessarily indicative of future results and forward-looking statements and projections are not guaranteed to achieve the results described and your actual returns may vary significantly. Investments in private placements are illiquid in nature and there may be no secondary market or ability to sell the investment should the need for liquidity arise. This material should not be construed as tax advice and you should consult with your tax advisor as individual tax situations will vary. Securities offered through Capulent, LLC, member FINRA, SIPC.