1031 exchange and tenancy-in-common seeking the right advisor to achieve tic investment objectives

A long-established section in the federal tax code, section 1031, allows real estate investors to sell property that has been held for investment purposes and defer capital gains and depreciation recapture taxes if they acquire "like-kind" exchange property of equal or greater value and reinvest all of their equity. Since the mid-1990s, many investors have experienced the benefit of reinvesting their equity into investment property interests structured as Tenancy-in-Common (TIC). TIC owners hold an undivided fractional ownership interest in investment property evidenced by a deed of trust.

TIC, also known as Co-ownership of Real Estate (CORE), enables an investor to participate in the ownership of institutional-grade, professionally managed investment properties. The investor's equity can be diversified amongst several different properties, geographic markets and real estate companies, potentially increasing both the value and safety of the real estate investment. TIC/CORE investments are designed to offer preservation of capital, predictable cash flow and long-term appreciation in institutional-quality investment property assets that benefit from greater economies of scale.

With its features and benefits, TIC/CORE is an increasingly popular 1031 exchange option for many real estate investors. However, 1031 exchanges and TIC/CORE transactions are very complicated, with both tax and legal issues topping the list of potential pitfalls. It is therefore essential that investors be knowledgeable about what to look for in a quality advisor. Financial advisors are required by securities law to be properly licensed in order to consult clients regarding TIC/CORE transactions and other investment interests in real estate. Financial advisors should hold both Series 7 and Series 63 securities licenses to qualify them as knowledgeable, well-rounded consultants in the investment process. It is essential that they have experience in the commercial real estate business, in addition to an understanding of personal investment objectives and client suitability issues.

But perhaps the most important component to look for in a TIC financial advisor is their intimate, trusted and deeply rooted relationships with key real estate companies. This attribute is critical to their ability to provide the best opportunities for their clients. There are almost 80 real estate companies across the United

States that are either already involved or considering involvement in the TIC/CORE industry as a real estate provider. As with any industry, these 80 companies represent varying degrees of acumen, experience and quality. To achieve the greatest potential for a client, a financial advisor should have consistent access to the top ten percent of these companies in order to provide their client access to the best properties available. Obviously, a new financial advisor with little or no experience or industry knowledge may not have access to the top real estate providers, as these providers prefer to work with experienced consultants that specialize in this unique segment of the market.

Investors should also be aware of how their financial advisor stacks up, looking for a history of successfully completed transactions. A long and proven track record indicates that a financial advisor is an experienced professional. An investor wants such an advisor in their corner asking all the right questions, making appropriate and suitable recommendations, understanding the nuances of successfully completing TIC/CORE transactions and providing answers to any and all tax and legal questions.

When considering a 1031 exchange or TIC/CORE investment, investors should ask the following specific questions of the financial advisor:

* What percentage of your business is 1031 exchange and/or TIC/CORE related?

* How many investors have you consulted that invested in TIC/CORE structured properties this year? How many last year?

* How long have 1031 exchanges and TIC/CORE been a focus of your investment recommendations?

* Do you have the appropriate licenses to complete this transaction (Series 7, Series 63 securities licenses)?

* With which real estate providers do you work most closely?

As customer demand continues to drive this segment of the real estate market, the emphasis on quality - quality consulting, quality property, and quality transactions - will be increasingly important. Part of the qualitative process is ensuring that financial advisors representing a client make appropriate recommendations for that client based on the client's best interest and not based on any "bias." A final issue that needs to be addressed is that it is not unusual for "referral" compensation to be paid between referring parties. This practice is illegal and a complete breach of ethics,. Therefore, if any form of compensation changes hands - disclosed or undisclosed - between financial advisors and Qualified Intermediaries, real estate companies or other unlicensed individuals derived from an exchange transaction, a felony may have occurred.

In short, investors should take the time to identify a reputable advisor who not only can provide acceptable answers to the above questions, but who will also have the relationships necessary to guide their clients into the appropriate investment. It is important to remember, firms or individuals involved in recommending, offering or selling 1031 TIC/CORE investments must be licensed with a broker-dealer, the SEC, the NASD and the state securities regulators in every state in which the firm or individual operates and in which the client resides. Any "unlicensed" firm or individual involved in recommending, offering or selling these investments is in direct violation of federal and state securities laws.

Co-ownership is the fastest growing option for 1031 exchange investors seeking suitable replacement property. Properly structured and presented, such investments can also generate new listing opportunities for real estate agents while satisfying both the IRS "like-kind" investment property requirements and the SEC and NASD securities regulations. The advantages of co-ownership of institutional-grade real estate are clear and compelling. When exploring co-ownership, smart investors need to seek out industry experts to guide them through the replacement property process. It is indeed the wise investor who is aware of his or her long-term goals that seeks experienced guidance to chart their course, thereby turning TIC/CORE investment opportunities into realities.

(c) 2005, 1031 Exchange Options. Reprint rights granted so long as the article and by-line are reprinted intact and all links made live. This article is neither an offer to sell nor an offer to buy real estate or securities. There are material risks associated with the ownership of real estate. You must be an accredited investor. Securities offered through Sigma Financial Corporation, Member NASD/SIPC.

Investing in gold

It may seem old fashioned, but it is still possible to place some of your wealth and prospects into the ancient practice of hoarding gold. Gold has been the standard of wealth for centuries, in almost every culture that requires some system of barter, from Europe to Asia to South America. The metal has been known to launch expeditions for new lands, start wars, and to be the cause of the annihilation of entire cultures.

The reasons for the world’s fascination with gold have been the same from the first item that a person exchanged one good for another until the present day. Gold is rare, easy to move, does not go bad or decay in any way, and it can be broken down into smaller parts. All cultures have recognized the value of gold, and as a result it is still a hot commodity on the markets in countries throughout the world today.

Many people who chose to invest in gold are somewhat skeptical about the state of the world. Gold, they figure, has always been and will always be in demand, so if the worst happens and an economy goes into the toilet, investments in gold will remain safe and secure (provided, of course, that it is not stolen, another common historical occurrence with the precious metal). Whenever a large scale war breaks out, gold prices always go up, as it is proof against an inflated and devalued dollar and other economic downturns.

Gold allows the investor a number of opportunities in their options. Many of us would not think of it in this way, but gold is easily stored in our houses and even in our persons in the form of decorations or jewelry, which means that gold is a kind of portable wealth. Someone who buys a lot of jewelry can therefore be thought of as a kind of investor in gold.

More serious investors might consider buying gold in the form of bullion or coins issued by stable, reputable governments through brokerage firms or well known dealers. Again, this gold is transportable, easily liquidated wealth and the investor must undertake for its safety herself. If you choose this method of investment and storing, you will have to get your gold tested before you can sell it on your own.

In order to avoid the expense and the hassle of testing your gold, you could instead choose to purchase the metal through a mutual fund that specializes in precious metals. Not only will this eliminate the need to have the gold tested before sale, it will also earn you some interest over time, which hard sales of gold will not. You will also avoid the costs of insurance and the anxiety of storage.

Investing in gold is a time proven way of retaining wealth even in the most trying of circumstances. The risks of gold also remain, however, as it remains a highly mobile commodity that can be taken away as easily as it is stored, and the proper precautions must be taken.