1031 Crowdfunding Review: Best REI Platform For You?

by vaibhav
Updated on

The REI crowdfunding platform is the largest and most popular on the market. However, it’s not without its flaws. This article will review each aspect of the product to help you decide which one suits your needs best.

The “1031 crowdfunding reddit” is a subreddit that provides information about the 1031 exchange. People who are interested in this type of investment can find helpful information on the subreddit.

1031 Crowdfunding Review: Best REI Platform For You?

Assume you sold a home for $250,000 with a cost basis of $150,000. You can either pay approximately 53.8 percent in taxes on $100,000 (typically federal tax of 15% to 20% plus state tax of 10% to 12%, depreciation recapture tax of 25%, and investment income tax (i.e., Obamacare) of 3.8 percent), or you can do a 1031 exchange and invest your $250,000 in a like-kind property, deferring the tax until you sell the new property. You may invest the whole $250,000 instead of paying $53,800 in taxes and having less than $200,000 to invest.

The attractiveness of a 1031 exchange is precisely this. But there’s a catch: you have to find the property you want to purchase within 45 days of selling the first one, and you have to close on the new one within 180 days of selling the first. With real estate investments, getting the time just right may be challenging. You must pay the tax if you do not meet those dates. In other words, your investment is vulnerable to “closing risk,” an expensive gamble that disqualifies many well-intentioned 1031 exchange investors.

Because you, along with other investors, acquire a part of an already qualified property, your closing risk is removed, and you may close on the exchanged property in three to five days because it has already been pre-funded.

The investor’s ownership structure inside the investment, rather than how the money is obtained, determines whether or not a 1031 exchange may be completed. Through a Delaware statutory trust (DST), investors get ownership of the underlying real estate asset without having to engage actively in the property’s purchase, maintenance, or sale.

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