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Glossary

Learn terms commonly used in our industry!

A 1031 exchange involves swapping one investment property for another to defer capital gains tax on the sale. The term gets its name from the Internal Revenue Services (IRS) code Section 1031.
It's important to understand common 1031 exchange terms and concepts. We've compiled common terms and questions to create a comprehensive 1031 Crowdfunding glossary for your reference.
An investor has 180 days from the relinquished property's closing date to buy a replacement property. This period includes the 45 days used to identify the replacement property.
In a 1031 exchange, an investor has 45 days from the closing date of their relinquished property to find a replacement property.
Accredited investors are investors who have the financial ability to absorb losses. These investors can trade unregistered securities as long as they satisfy one or more requirements for net worth, asset size, income, professional experience or governance status. Examples of accredited investors include high net worth individuals (HNWI), trusts, banks and insurance companies.
Capital gains are the profits earned from the sale of a real estate asset.
Cost segregation analysis is the process of identifying assets and their costs and then classifying them for tax deductions.
A Delaware Statutory Trust (DST) is a legal entity often used in real estate investing. DST investors own a pro rata interest in the trust and serve as beneficiaries who receive monetary distributions from rental income or property sales.
Like-kind properties are real estate assets of a similar nature that can be exchanged without incurring a tax liability, as specified in Section 1031 of the Internal Revenue Code (IRC).
A qualified intermediary is the person a property seller chooses to oversee the 1031 exchange process.
A qualified opportunity fund is designed for investments in "opportunity zones," which are economically distressed or disadvantaged areas.
In a 1031 exchange, a replacement property is purchased in place of a relinquished property. It must be of equal or greater value to the relinquished property.
Senior housing refers to housing communities with long-term residents typically over the age of 65. Investors often choose senior housing as the replacement property in a 1031 exchange.
The seven deadly sins of Delaware Statutory Trusts (DSTs) state that:
1. Future equity contributions are not allowed.
2. Trustees can't renegotiate the terms of existing loans or borrow new funds.
3. Trustees can't reinvest proceeds from the sale of DST investments.
4. Trustees' capital expenditures are limited.
5. Liquid cash must be invested in short-term debt obligations.
6. Cash must be distributed to beneficiaries on a current basis.
7. Trustees can't renegotiate the current leases or enter into new ones.
TTT is an acronym for three of the biggest hassles rental property owners deal with: tenants, toilets and trash.
Tenant in Common (TIC) is a co-ownership agreement in which several investors combine funds to own a property jointly. Each investor owns a fractional, undivided interest in the property and has the right to transfer that interest without consent from the other co-owners.
A triple net lease is a real estate agreement in which a tenant agrees to pay property expenses such as maintenance, real estate taxes and building insurance.