February 2021 RHA Update Newsletter

February 2021

A monthly newsletter published by the Rental Housing Alliance Oregon

rha est. 1927

www.rhaoregon.org

In this issue:

RHA Calendar of Events............................................page 2 President’s Message.............page 3 Dear Maintenance Men....................... ...........................................................page 4 Amazon Unlock the Potential of Passive Real Estate Investing.......................................page 5 Tax Deductible Info................page 6 5 Ways to help you Spot Fake Landlord References.............page 9 5 Things to Remember......page 10

Rental Housing Alliance Events & Classes

Join us for RHA Oregon’s Membership Meeting This will take the place of our dinner meeting for the month of February (until we can safely hold them again.)

*Free to Attend!* When:February 17, 2021 at 6:00pm Where:Via Zoom Who: Charles Kovas with Charles Kovas Law

What: Charles A. Kovas, attorney at law, will be discussing Oregon’s ongoing eviction moratorium as well as continuing federal law. This affects non-payment of current rent as well as arrears from the Covid emergency period. Oregon landlords may also apply to a new landlord compensation fund. Other topic areas included no cause notices of termination, 90 day stated cause notices of termination and the temporary changes to Oregon eviction laws.

DATE

EVENT

LOCATION

TIME

02/10

Board Meeting

Zoom

4:00pm

02/25

Mentor Round Table

Zoom

6:00pm

03/10

Board Meeting

Zoom

4:00pm

03/20

Mentor Round Table

Zoom

11:00am

DATE

CLASSES

INFORMATION

LOCATION

TIME

INSTRUCTORS

02/03 How to use Landlord-Reference.com

Join.me

7:00pm

Robert Collier w/Landlord-Reference.com

02/09 Online Tenant Screening Class

WebEX

11:00am

Marcia Gohman w/National Tenant Network

02/11

Online Tenant Screening Class

WebEX

7:00pm

Marcia Gohman w/ National Tenant Network

02/11

How to use Landlord-Reference.com

Join.me

7:00pm

Robert Collier w/Landlord-Reference.com

02/11

Overview of HB 4401

Zoom

6:30pm

Russell White w/Bluestone & Hockley

02/16

How to use Landlord-Reference.com

Join.me

7:00pm

Robert Collier w/Landlord-Reference.com

02/18

Managing During the Moratorium

Zoom

11:30am

Charles Kovas w/Charles Kovas Law

02/23

Online Tenant Screening Class

WebEX

7:00pm

Marcia Gohman w/National Tenant Network

02/23

Real Estate Investing During the Pandemic

Zoom

6:30pm

Amber Clark w/The Garcia Group

02/24

How to use Landlord-Reference.com

Join.me

7:00pm

Robert Collier w/Landlord-Reference.com

02/25

Online Tenant Screening Class

WebEX

11:00am

Marcia Gohman w/National Tenant Network

03/09

Online Tenant Screening Class

WebEX

11:00am

Marcia Gohman w/National Tenant Network

03/11

Property Management

Zoom

6:30pm

Kurt Lane w/Chroma Property Management

03/11

Online Tenant Screening Class

WebEX

7:00pm

Marcia Gohman w/National Tenant Network

03/18

Property Management

Zoom

11:30am

Kurt Lane w/Chroma Property Management

03/23

Online Tenant Screening Class

WebEX

7:00pm

Marcia Gohman w/National Tenant Network

03/23

Application Screening/F.A.I.R

Zoom

6:30pm

Amber Clark w/The Garcia Group

03/25

Online Tenant Screening Class

WebEX

11:00am

Marcia Gohman w/National Tenant network

For additional class/event information visit: https://rhaoregon.org/education All educational classes/seminars are open to members in good standing and the general public. A member in good standing may register and pay for an invited guest at the member rate for the educational class. General public must pay at the time of registration and at the non-member rate. To qualify for the early bird registration rate you must have your registration into the RHA office no later than 4:59pm on the listed early registration date in the advertising for the event. Deadline for refund/credit or cancellation of registration is up until 48 hours prior to the date and time of the class/seminar, up until 48 hours prior you will be refunded 100% of the cost to attend. If a registered guest/member does not cancel and/or does not show to the scheduled class/seminar then the registered guest/member will be required to pay the full amount of the class/seminar. All registrations are non-transferable. Currently all classes are in Zoom meeting format. RHA Oregon is not responsible for attendee’s inability to log into Zoom meeting. The Zoom invite will go out as an email to all those registered. Please check your spam folder email settings to make sure you receive the email invite. RHA is not responsible for lost or spammed emails.

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RENTAL ALLIANCE UPDATE February 2021

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President’s Message Ron Garcia, RHA Oregon President

February 2021 Like so many other seasons and events, it feels different this year.

Sure, we will still be watching the Super Bowl and celebrating Valentine’s Day. And a lot of us will take President’s Day off from work or school. But – so many of us are working from home nowadays, and home-schooling, (or don’t even have a job right now), that having a day off just doesn’t sound that exciting.

I am not sure how Cupid is fairing in this pandemic either. It seems like these days a great romantic date might be to go out and get the vaccination. And as difficult as that may be to pull off, it’s still probably easier than finding an open restaurant!

Our Super Bowl parties need to remain within our own pods now, instead of with our old friends. For me, that means my wife and I get to watch the game together. By ourselves. Like we watch TV every other night. Maybe we need to create Party Noise the way the stadiums create Crowd Noise in the absence of real people. Is there an app for that?

But this year, President’s Day has really taken on a renewed significance! Oh sure, we have a new guy in the Oval Office and once again proved to the world we could transfer power without ending up at war. But for me, it means being the newly re-elected President of the Rental Housing Alliance Oregon! It means that I can once again share my outlook with our members without risking my social media account status. What a great day!

So, let me share with you some great ways to spend some days in February as Landlords while we all battle the effects of COVID-19. Here is what I am doing: For me, I mourn the loss of some close friends. I stay socially distant and I hope to get vaccinated soon. I wear a mask.

I’ve helped deliver food baskets at my church to the homeless.

And I am staying on top of the quick changing Eviction Moratorium regulations (as they both alter my relationship with my tenants and affect my income from rents) by attending a lot of zoom classes.

I am also going to apply for Landlord Relief to get 80% of my past owed rent paid back to me by the State of Oregon thanks to HB 4401 that was passed with our support from Rental Housing Alliance Oregon’s lobbying efforts. Go to this site now: https://www.oregon.gov/ohcs/housing-assistance/Pages/landlord-compensation-fund.aspx While I recognize that I am struggling a bit, I also know a lot of other Landlords are struggling a lot more. So what else can we do? Share your story! RHA Oregon has created a MobileCause app –it’s like a go-fund-me account for fellow Landlords. We want to hear how you have been affected personally. Submit your situation and you will be eligible to receive some cash assistance. Go to https://igfn.us/e/UD5z9Q Of course, we need your financial help too. You can donate from the website, or you can donate from your phone! Text rha2020 to 41444. It’s the most exciting thing I have done this month and it’s Super easy. A Heartfelt show of affection. It may even give you a Presidential glow! ! Hope you have a great February. Please donate now.

Learn more on our website at www.rhaoregon.org Ron Garcia RHA Oregon President www.rhaoregon.org

RENTAL ALLIANCE UPDATE February 2021

3

Dear Maintenance Men

by Jerry L’Ecuyer & Frank Alvarez

Dear Maintenance Men: I have been replacing rusted and dented HVAC vents and electrical wall receptacles in a rental unit. However, they don’t look right. There are a lot of gaps between the vents and plates and the wall. Some of the walls are not perfectly flat or the texture is bumpy. How do I make these installs more professional looking?

Julien Dear Julien: Caulk is your friend and caulk will hide a multitude of sins!

On a job like this we recommend getting a squeeze tube of painters caulk. Squeezable caulk tubes are readily available at any hardware or home center. Cut a small angled cut off the tip of the tube. Best to make the cut about 45 degrees. You want to open the tube just enough to get about an eighth inch thick line of caulk out of the tube. Run this caulk line all around the vents and wall plates edges. Gently run your finger along the caulk line pressing it into place. Any excess caulk can be removed with a damp paper towel. Once done, your vents and plates will look like they are part of the wall and will look very professional.

Dear Maintenance Men: What is one thing I can do to make an older rental unit appear more modern.? I don’t want to do a complete rehab, just a few touches to appear more up to date.

Randy Dear Randy: We have recently discovered an easy way to make many people very happy with this simple update to a unit. Purchase and install wall outlets with USB ports. Today everybody has a phone and or a tablet with them. However, getting that phone or tablet charged is always a challenge. Install a USB enabled receptacle in the kitchen, in each bedroom and along any suitable flat surface. All a resident needs to have is a USB wire to change their devices and they will think this is a very clever idea! Another idea is to replace boring kitchen cabinet knobs with nice modern updated knobs. This will lift the look of your kitchen and bathrooms without breaking the bank.

Dear Maintenance Men: What is the normal time frame for a one or two bedroom make ready? I have always heard the three-day rule to get an apartment ready for rent. My units seem to be on the three-week rule!

How can I tighten up the process and turn my units faster?

Martin Dear Martin: The “Three-Day Rule” is a nice goal to strive for and can be done. But, most units are not in rent ready condition when we get them back from our departing residents. Here’s a useful time table and work schedule for a one or two bedroom apartment requiring complete paint, carpet, flooring, minor repairs, window coverings and cleaning.

blinds, drapes, switch outlet plates etc.

Day 3:Paint Day 4:Carpet/Flooring Day 5:Installation of window coverings, doorstops, switch/outlet plates, fixtures, accessories, toilet seat etc. Touch up paint if needed.

Day 6:Cleaning – General cleaning including windows & final inspection.

If you have done a pre-inspection of the unit before the resident moves out. You can plan what needs to be done before the unit is vacant. Organize the maintenance techs and contractors ahead of time. Have all the repair and replacement parts ready to go. The key is to plan each day and try to stick to the plan.

WE NEED Maintenance Questions!!! If you would like to see your maintenance question in the “Dear Maintenance Men:” column, please send in your questions to: DearMaintenanceMen@gmail.com Bio: If you need maintenance work or consultation for your building or project, please feel free to contact us. We are available throughout Southern California. For an appointment please call Buffalo Maintenance, Inc. at 714 956-8371 Frank Alvarez is licensed contractor and the Operations Director and co-owner of Buffalo Maintenance, Inc. He has been involved with apartment maintenance & construction for over 30 years. Frankie is President of the Apartment Association of Orange County and a lecturer, educational instructor and Chair of the Education Committee of the AAOC. He is also Chairman of the Product Service Counsel. Frank can be reached at (714) 956-8371 Frankie@BuffaloMaintenance.com For more info please go to: www.BuffaloMaintenance.com Jerry L’Ecuyer is a real estate broker. He is currently a Director Emeritus and Past President of the Apartment Association of Orange County and past Chairman of the association’s Education Committee. Jerry has been involved with apartments as a professional since 1988.

FIND EVICTIONS STRESSFUL?

503-­‐242-­‐2312

Full FED Service First Appearances evict@landlord-­‐solutions.com Small Claims

Day 1 & 2:Paint prep, trash out, minor repairs, removal of 4

RENTAL ALLIANCE UPDATE February 2021

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Amazon Unlocks the Potential of Passive Real Estate Investing

Austin Bowlin, CPA – Partner at Real Estate Transition Solutions It is called the Amazon Effect—and you’ve probably heard the initial capital investment, the investor plays no role in a lot about it. The ecommerce giant has reshaped, well, the operations of the property but shares in the profits or nearly everything, from the way that consumers think income. about shopping and accessing goods to the global supply chain. For institutional investors, the Amazon Effect has The Benefits of Passive Real Estate Investment squarely placed industrial properties as the darling of the in CRE commercial real estate market, and Amazon tenants are Passive real estate investing has grown tremendously among the most coveted. in commercial real estate, and today, there are more opportunities than ever before to place your money in a The insatiable demand has encouraged Amazon to seek high-quality, hands-off equity vehicle. Commercial real alternative properties as well. Many analysts predict that estate provides stable income and strong appreciation, Amazon could repurpose obsolete and vacant big-box but these assets also come with a high-barrier to entry department store properties into industrial distribution and require expertise to successfully execute the business centers, another sign of the soaring demand for these strategy. Passive investing, however, can unlock the spaces. tremendous financial and wealth-building benefits of commercial real estate assets.

While investors are targeting the broad ecommerce market, Amazon is arguably the most desired and top-tier Three Passive Investment Vehicles to Own CRE credit tenant for these properties, and property owners Today, there are a lot of ways to place capital in real estate are happy to lock in long-term triple net leases, which through an equity vehicle. Some methods are new—like help to reduce operating expenses for the owner. Like crowd funding or opportunity zone funds—and others are most industrial properties, Amazon operates facilities on tried and true, like Delaware Statutory Trusts, REITs and triple net leases, meaning that they pay for most operating real estate funds, which are among the most popular and expenses, including common area maintenance fees, proven vehicles. insurance, and property taxes.

The benefits of this trend aren’t for institutional capital alone. Small and mid-sized investors can tap into the earnings potential of Amazon industrial assets through tax-deferred 1031 exchanges and passive real estate investing.

First, What Is Passive Real Estate Investing?

Passive investing simply means that the investor does not take an active role in the property or business. It includes equity assets, like stocks or mutual funds, or real estate assets, like REITs or Delaware Statutory Trusts. When it comes to real estate, there are direct and indirect styles of passive investment.

Direct Passive Real Estate Investing

Real estate is generally considered a passive income asset, but anyone who has ever self-managed an apartment property knows that isn’t always true. Owners with a professional property management firm that handles the day-to-day operations, maintenance and leasing of the property, or commercial owners with tenants on triplenet leases—a lease where the tenant pays for the majority of the operations costs—have a more passive investment experience. Leveraging this strategy, a property owner simply collects the income each month while playing a minor role in the operations of the property.

Indirect Passive Real Estate Investing

The indirect style of passive real estate investing is completely hands-off. An investor can buy into any number of real estate equity vehicles, gaining fractional ownership in the asset or portfolio of assets. Other than www.rhaoregon.org

Delaware Statutory Trust

A Delaware Statutory Trust or DST is a type of business trust that owns and operates real estate property. A real estate firm, known as the DST sponsor, acquires a property with its own capital first, then structures the property in a DST and brings it to the market through an official offering. Investors buy a fractional or concurrent ownership stake in a quality, professionally managed asset and receive monthly income in proportion to their ownership stake. DST’s have increased in popularity over the last decade because they qualify as a replacement property in a 1031 exchange.

REITS

A real estate investment trust—or REIT as it is more commonly known—is a company that acquires, owns, and operates real estate assets. There are public and private REITs, as well as traded and non-traded REITs. Private non-traded REITs work typically with institutional capital sources, but public both traded and non-traded REITs are registered with the SEC and shares are either traded in the public exchange markets or available for direct purchase from the issuer. Historically, they pay healthy dividends of 5% on average, much higher than the average stock dividend of 2%.

Real Estate Funds

An alternative to investing directly in a single REIT, funds such as a real estate interval fund invest in a variety a REITs, providing investors greater diversification. Some real estate funds trade in public exchange markets and others can be purchased directly through the fund. Unlike DSTs and REITs, real estate funds (continued on page 8) RENTAL ALLIANCE UPDATE February 2021

5

The Rental Housing Alliance Oregon is a 501(c) (6) corporation. As such, we are allowed to lobby to influence legislation. A portion of the annual dues are utilized for lobbying activities on behalf of our members.

deductible as a business expense; however, the RHA Oregon estimates that 15.87% of the dues payment is not deductible as a business expense because of RHA Oregon’s lobbying activities on behalf of its members.

The figure shown above represents the portion of your 2020 dues utilized for lobbying activities at both the state and local level.

Please consult with your tax advisor regarding the proper treatment of your dues for income tax purposes.

Your membership dues payments may be tax deductible as a necessary trade or business expense.

The portion of your dues utilized for lobbying activities is not deductible.

Dues paid to the Rental Housing Alliance Oregon are not deductible as a charitable contribution but may be

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RENTAL ALLIANCE UPDATE February 2021

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5 WAYS TO HELP YOU SPOT FAKE LANDLORD REFERENCES by the Editors of the Rental Housing Journal

One of the most crucial aspects in tenant screening is that of checking your prospective tenant’s landlord references.

Unfortunately, some tenants have been known to make up references or list friends or family members as previous landlords. There are even companies that hire themselves out to pose as landlords.

As a property manager, you are bound to receive landlord references day in and day out. Some are beautifully written testaments to the incredible nature of these individuals looking to rent, while others are simply fake, with bogus testimonials about the tenants.

Here are five ways in which you can spot fake references.

No. 1- Call the references Yourself For starters, on most landlord references, they will provide a phone number. One of the first things you can do to tell if the reference is a fake is to call the number inquiring about a rental. If it is fake, the number either won’t work or will lead to a completely different person or place.

A fake, on the other hand, will likely have nothing specific to say. This can help you further determine whether the person on the other line is a real landlord or someone just posing as such.

In Conclusion As a property manager, a significant part of your job involves filling properties with quality, long-term tenants.

Including thorough reference verification as part of your screening process such as the strategies above, can help you avoid costly mistakes and keep you a few steps ahead of the game.

Permission to reprint by-The RentalHousingJournal.com is an interactive community of multifamily investors, independent rental home owners, residential property management professionals and other rental housing and real estate professionals. It is the most comprehensive source of news and information for the rental housing industry. Their website features exclusive articles and blogs on real estate investing, apartment market trends, property management best practices, landlord tenant laws, apartment marketing, maintenance and more.

In rare instances, a fake number does lead to an individual, but they may seem to be either untruthful or not detailed in their answers.

No. 2- Check on the Name Go online and Google the reference’s name and look them up on social-media platforms. Check to see if this person is tied to the potential tenant through tagged pictures and /or posts. If there is a lot of overlap in the peoples profiles, these individuals may have a personal relationship and not a tenant landlord relationship.

No.3-Look at Tax Records The tax records for all property owners are in the public domain. All you have to do is look up the records for the address where the applicant claims to have lived.

The name on the tax record should match the name you’ve been given. Double-check that the property hasn’t been sold, but otherwise, this is a great way to spot a fake.

No. 4-Analyze a Reference’s Answers It’s best to always fall back on your knowledge as a landlord and analyze the answers that the potentially fake landlord reference has given you. If their answers are vague and don’t have details, then it’s likely that they aren’t a real landlord and are instead a friend or family member of the person who is trying to rent from you.

No.5-Ask for Advice Landlords tend to have the same frustrations, interest and problems. It wouldn’t be at all unusual for you, as a property manager, to ask for some advice from another landlord while calling for a reference. Ask for their procedure for getting rid of a tenant who doesn’t pay, for instance, A real landlord will have an actual answer, even if they’re not interested in spending much time on the phone with you. www.rhaoregon.org

RENTAL ALLIANCE UPDATE February 2021

7

Amazon Unlocks Potential CONTINUED FROM PAGE 5

do not pay out dividends or monthly income. Instead, they produce value through appreciation at the exit or sale of the investment.

Amazon as a 1031 Exchange DST Property

Through these passive investing strategies, individual investors can access high quality, institutional grade assets—which brings us back to the Amazon Effect.

While these strategies are not exclusive to Amazon, they are an opportunity for investors to take advantage of the industrial bull market.

One of the strategies to consider is a 1031 Exchange using a Delaware Statutory Trust to own Amazon Net Lease properties as a 1031 replacement property. This strategy offers the tax deferral benefits of a 1031 Exchange coupled with the passive management benefits of a DST and the stable income potential of Amazon industrial properties.

How a Delaware Statutory Trust Works Since 2004, DST investments have qualified as a replacement property in a 1031 exchange. Although this exchange lets owners shift their business model from direct to fractional ownership, all of the 1031 exchange basics are the same. The seller has 45 days to identify a replacement property, in this case, one or more DSTs, once they sell an asset. The identified replacement property must adhere to one of the three allowable identification methods: the 3 property approach, 200% approach or 95% approach. The transaction must close in 180 days from the original sale of the property. Like a standard exchange, investors can defer capital gains taxes through this transaction.

There are a number of DST investments from reliable sponsors with a successful history. DST sponsors will structure the trust, which includes property inspection and due diligence, securing debt if needed and structuring the DST offering in compliance with SEC regulations. All of these costs are included in the official offering.

For Amazon-occupied properties, investors should look for industrial DST offerings. Per SEC regulations, DST sponsors cannot publicly advertise current offerings. To find an offering that fits your goals, research reputable sponsors consult a licensed 1031 Exchange Advisor.

Delaware Statutory Trust Pros & Cons There are tremendous benefits to investing in a DST through a tax-deferred 1031 exchange. Exchanging out of direct ownership eliminates the work of daily property management. DSTs also have low minimum investments – typically $100,000 – allowing investors to diversify their exchange across multiple DST properties.

Because DST investments are typically institutional-grade assets, like an Amazon net leased property, they can potentially deliver higher monthly income and appreciation than direct ownership—depending on the asset of course.

Of course, like any investment, there is also a downside. Lack of liquidity and timing of exit are primary DST risks. DST properties are typically held for 3 to 10 years and early exits are typically not possible. While one of the benefits of a DST is hands-off management, it also means that investors do not have any voice in management 8

RENTAL ALLIANCE UPDATE February 2021

decisions. For this reason, it is imperative that you choose a strong sponsor with a proven track record when investing in DST real estate.

Leveraged DST properties can also pose a risk. High leverage—at 80%, for example—can significantly reduce monthly cash flow because the majority of the profits will be used to pay the debt service on the asset. Most DSTs use leverage between 50% – 58% so as to not take on undue risk. When considering a DST property, conduct thorough due diligence before investing.

Learn more about Delaware Statutory Trusts If you are considering a Delaware Statutory Trust for your 1031 Exchange and have questions, contact Real Estate Transition Solutions to schedule a complimentary consultation with one of our licensed 1031 Exchange Advisors. Our free consultations can be done over the phone, via web meeting, or in person at our offices located in Mercer Island, WA, Portland, OR, or in San Francisco, CA. To schedule your free consultation, call 206-686-2211, email info@re-transition.com, or visit www.re-transition.com/free-1031-consultation.

Austin Bowlin, CPA is a Partner at Real Estate Transition Solutions and leads the firm’s team of 1031 Exchange Advisors & Analysts. Austin advises on tax liability, deferral strategies, legal entity structuring, co-ownership arrangements, 1031 Exchange options, and Delaware Statutory Trusts.

About Real Estate Transition Solutions Navigating the Exchange process successfully can be challenging and complex. For over 20 years, Real Estate Transition Solutions has helped investment property owners navigate and execute tax-deferred 1031 Exchanges, Delaware Statutory Trusts (DSTs), complex real estate investments, and tax planning strategies. Our team of licensed 1031 Exchange Advisors will help you select and acquire Exchange properties that are carefully designed to help meet your objectives. To learn more about Real Estate Transition Solutions, visit our website at www.re-transition.com.

This is for informational purposes only, does not constitute as individual investment advice, and should not be relied upon as tax or legal advice.

Please consult the appropriate professional regarding your individual circumstance. There are material risks associated with investing in DST properties and 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, potentially adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Potential cash flows/returns/ appreciation are not guaranteed and could be lower than anticipated.

Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.

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 investor situations and objectives vary this information is not intended to indicate suitability for any individual investor. A REIT is a security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. There are risks associated with these types of investments and include but are not limited to the following: Typically no secondary market exists for the security listed above. Potential difficulty discerning between routine interest payments and principal repayment.

Redemption price of a REIT may be worth more or less than the original price paid. Value of the shares in the trust will fluctuate with the portfolio of underlying real estate. Involves risks such as refinancing in the real estate industry, interest rates, availability of mortgage funds, operating expenses, cost of insurance, lease terminations, potential economic and regulatory changes. This is neither an offer to sell nor a solicitation or an offer to buy the securities described herein. The offering is made only by the Prospectus.

Real Estate Transition Solutions offers securities through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services through Concorde Asset Management, LLC (CAM), an SEC-registered investment adviser. Real Estate Transition Solutions is independent of CIS and CAM. www.rhaoregon.org

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RENTAL ALLIANCE UPDATE February 2021

9

FIVE THINGS TO REMEMBER WHEN DECIDING TO DO A 1031 EXCHANGE

BY DWIGHT KAY AND THE KAY PROPERTIES TEAM A 1031 exchange is a legal way for investors to defer their capital gains taxes on the sale of real estate held for investment or business purposes. It allows one to defer taxes on a property sale as long as they follow specific 1031 rules and guidelines. In other words, you have the potential to keep all your profits working for you with the purchase of your next investment property, without the IRS coming after you looking for their share of the pie. Here are five things to remember before a 1031 exchange.

1. Taxes are Applicable in a Non-1031 Exchange When an investor sells a property that has gone up in value this results in several types of taxes. These include capital gains taxes, which the investor must pay if they sell the asset at a price higher than they initially paid for it. Federal capital gains are taxed at 15-20% of the increase in value, while state capital gains are taxed between 0-13.3% of the increase in value.

Depreciation recapture taxes are taxes due when the seller had claimed depreciation expenses on the sold property.

Depreciation recapture is currently taxed at 25% of the amount you have depreciated over the years. Other taxes incurred on property sales include the 3.8% Medicare surtax.

All these taxes are able to be deferred if you do a 1031 exchange. But if you choose to sell your property without a 1031 exchange, ensure you consult a reputable attorney and CPA so you can know what your full tax bill will be when adding up federal capital gains, state capital gains, depreciation recapture and the medicare surtax.

2. You Need a Qualified Intermediary A 1031 exchange isn’t as simple as selling and reinvesting in another property. You must first transfer the relinquished property to an intermediary or an accommodator so they can execute the sale on your behalf. This is a process whereby your sale contract is assigned to the qualified intermediary and when the property closes your funds are then wired to your account at the qualified intermediary. From there you will instruct which properties you would like the qualified intermediary to purchase on your behalf. Kay Properties is not a qualified intermediary however we work with many throughout the country so if you would like a referral please let us know.

3. You Can Only Purchase a Like-Kind Asset 0.0625For you to defer taxes via a 1031 exchange, you must reinvest the profits from the sale in like-kind property.

In other words, if you sell a property held for investment or business purposes in a 1031 exchange, the replacement property must be of the same character. For example, you could sell an apartment building and purchase a commercial building or you could sell a rental home and purchase a DST 1031 investment.

4. Remember Deadlines 1031 exchanges are subject to deadlines. If you sell a property today, you’re expected to have identified the replacement property within the next 45 days and reinvested the proceeds in it within 180 days. But if you’d already identified the replacement property, you can reinvest immediately.

5. Understand Your Options Once investors have decided to do a 1031 exchange they should consider their options. First, they could purchase another type of investment property that they would manage on their own. Second, they could purchase a triple net lease property whereby a national tenant such as Walgreens or FedEx has leased the property for typically 10-15 years.

The problem with the triple net leased properties is that it causes investors to place a large portion of their net worth into a single property which could be disastrous (think Blockbuster Video). Third, if the investor is wanting to get out of active management and the day to day issues of dealing with tenants, toilets and trash as well as they are wanting to diversify their investments into multiple properties then a DST 1031 exchange may be a solution. The DST (or Delaware Statutory Trust) is a type of property whereby the management is handled by a third party trustee and since the typical minimum investment of a 1031 DST offering is $100,000 investors are able to purchase a diversified portfolio of Delaware statutory trust properties that may include a piece of Walgreens for 100k, piece of a FedEx distribution warehouse for 100k and a piece of a 800 unit portfolio of multifamily properties located throughout the south east and Texas*.

If you are interested in learning more about your 1031 exchange options please get in touch with us today to learn more. About Kay Properties and Investments, LLC:Kay Properties and Investments, LLC is a national Delaware Statutory Trust (DST) investment firm with offices in Los Angeles, San Diego, San Francisco, Seattle, New York City and Washington DC. Kay Properties team members collectively have over 114 years of real estate experience, are licensed in all 50 states, and have participated in over $9 Billion of DST real estate. Our clients have the ability to participate in private, exclusively available, DST properties as well as those presented to the wider DST marketplace; with the exception of those that fail our due-diligence process.To learn more about Kay Properties please visit: www.kpi1031.com. * These are illustrative examples of 1031 DST offerings. Future available 1031 DST offerings and tenants may be different. Diversification does not guarantee profits or protect against losses.This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing. This email contains information that has been obtained from sources believed to be reliable. However, Kay Properties and Investments, LLC, WealthForge Securities, LLC and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax or legal professional for details regarding your situation. This material is not intended as tax or legal advice. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) properties and real estate securities including illiquidity, 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 multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed. For an investor to qualify for any type of investment, there are both financial requirements and suitability requirements that must match specific objectives, goals and risk tolerances. Securities offered through WealthForge Securities, LLC, Member FINRA/SIPC. Kay Properties and Investments, LLC and WealthForge Securities, LLC are separate entities. There are material risks associated with investing in DST properties and real estate securities including illiquidity, 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. Past performance is not a guarantee of future results. Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation. This is not a solicitation or an offer to see any securities. Please read the Private Placement Memorandum (PPM) in its entirety, paying careful attention to the risk section prior to investing..

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RENTAL ALLIANCE UPDATE February 2021

www.rhaoregon.org

Considering Selling Your Investment Property?

Considering a

1031 Exchange?

ASK US ABOUT:

1031 Exchange Solutions Real Estate Investing Seminars and Workshops Passive Investment Opportunities – No More Tenants Toilets and Trash!

Delaware Statutory Trust (DST) Properties Triple Net Leased (NNN) Properties 721 Exchange UPREIT Properties – How to 1031 Exchange into a Real Estate Investment Trust (REIT) Opportunity Zones Preferred Return Investment Opportunities

Learn More at www.kpi1031.com or call 1.855.466.5927

CALL TODAY

FOR A FREE BOOK ON 1031 EXCHANGES YOU WILL ALSO GET FREE 1031 EXCHANGE LISTINGS! 1.855.466.5927 or visit www.kpi1031.com

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing. IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes therefore you should consult your tax and legal professional for details regarding your situation. This material is not intended as tax or legal advice. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) properties and real estate securities including illiquidity, 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 and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed. Securities offered through WealthForge Securities, LLC. Member FINRA/SIPC. Kay Properties and Investments, LLC and WealthForge Securities, LLC are separate entities. Preferred return is not guaranteed, and subject to available cash flow. www.rhaoregon.org

RENTAL ALLIANCE UPDATE February 2021

11

Monthly Fire Safety TipSafety Tip Monthly For Multi-Family Housing

Fire Alarm Systems

Tualatin Valley Fire & Rescue 503.649.8577

Fire Alarm Systems are critical when living in apartment communities and chances are, you have a Fire Alarm System and don’t even know it!

Here are some tips to help you notice the differences between smoke alarms and two common types of Fire Alarm Systems...

Smoke Alarms are mounted on the ceiling or wall in your home, and are designed to Fire Alarm Horn/Strobe sound in the presence of smoke. This is especially critical when you and your family are asleep.

When your smoke alarm ‘smells’ or detects smoke, it will activate and sound inside your living space only, not the entire building.

Smoke Alarm

Fire Alarm Systems (as opposed to smoke alarms) are made up of multiple components and are designed to notify all the residents throughout the entire building.

There are different types of Fire Alarm Systems in apartment communities, local and monitored. Local systems sound an alarm on-site only, while monitored systems automatically call 911.

Fire Alarm Pull Station

Regardless of the type of system, always call to 911 in the event of a fire or emergency. It is important to treat every alarm sound as a real emergency regardless of the time of day.

Fire Alarm Bells If you would like more information about the Fire Alarm System in your complex, please contact your apartment manager or visit our website.

For more fire safety tips, visit www.tvfr.com