Old Problem:
Investors struggle to identify suitable replacement property in time, resulting in two potential consequences:
- The entire transaction fails because suitable replacement property cannot be identified and closed; or
- Investors rush to find a replacement property, which defers only some of their gain, as they are stuck with leftover proceeds from a partial exchange. These leftover funds can trigger capital gains taxes, and depreciation recapture if not exchanged within the 180 day closing window.
There are no traditional land bank options. DST’s were the prior best choice, and have high commissions/entry fees, require accredited investor status, and are highly illiquid. Typically investors need to remain in the funds for 2-3 years to break even on their original investments, and exit fees. In many cases, investors remain committed for 5-7 years.
New Solution:
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1031Max offers a principal-protected land bank fund that provides liquidity.
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Investors can place leftover funds into a principal-protected asset with a guaranteed repurchase at the entry amount.
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Funds are held on an FDIC insured fiduciary platform by a Fortune 50 financial institution.
- The land bank vehicle (a real estate interest) generates income from the operations of its underlying land, generating returns for the investor.
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The land bank fund maintains complete liquidity so proceeds can be pulled into new acquisitions when ready. Most practitioners would recommend a one-year minimum commitment, but borrowing options are available for shorter stays.
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No lock-up periods, exit fees, or commissions to park funds held for one year or longer.
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This land bank fund innovation empowers investors to complete partial 1031 exchanges without getting penalized on un-invested proceeds.
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It provides full tax deferral while retaining flexibility to reinvest in the future.
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The land bank enables investors to take their 1031 to the max.
