With these TIC
investments, Reue solved two problems: He avoided investing in an uncertain
stock market and, more importantly, he deferred about $80,000 in taxes at the
time of the sale. Also, he did not have to search for the swapped properties
himself, since the broker-dealer he employed performed that step for him. “I
didn’t have any idea even where to start looking,” he admits. He chose to
acquire an interest in the medical office building because it is a very stable
property, he says. “It was essentially 100-percent leased, so there was already
a definite amount of income that the property was generating.” The student
housing facility, Reue observed, probably had sizable upside potential that
would be realized when he eventually sold that property. “At that time, we can
exchange the proceeds from the student housing property into another property
swap,” he says. Of course, taxes are continually deferred as well.Reue did,
at closing, pay a fee of 14 percent of the total value of the property that he
swapped for fractional ownership in each of the three replacement properties.
“At this point, we’ve had no negative experiences,” he says. “However, if the
real estate market happens to take a slide, you might lose the value of whatever
you have exchanged into.” In the meantime, he receives an 8 percent to 10
percent return on each investment, which comes in on a monthly or quarterly
basis. “I’m happy with that,” he says, “and I don’t have to do any management at
all.”
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