Understanding a 1031 Exchange

The IRS Code reads:

“No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like kind, which is to be held either for productive use in a trade or business or for investment.”

What it means:

Section 1031 of the Internal Revenue Code states that upon the sale of a property, the investor can use the funds from the sold property to purchase another similar property and not be liable for any capital gains taxes on proceeds from the initial property.

Understanding Capitalization Rate

Some common approaches to valuing a business as a going concern involve determining a good measure of earning power and capitalizing it. This determines the value of the business to an investor based on the future returns he or she can reasonably expect. A Capitalization Rate, commonly referred to as a Cap Rate, serves as the basic metric to value a Real Estate deal. It is the yearly rate of return expected on an all cash investment in a real estate property.

For example

Industry Expert Calls Bottom of Real Estate Market and Launches Real Estate Investment Marketplace

Sales of new homes have been climbing at a steady pace, while existing homes on the market for sale are declining. This has caused real estate prices to appreciate significantly, thus further supporting indications of a real estate recovery. New home construction picked up significantly by increasing 12% Y-O-Y in December. 2012 saw the largest number of new homes constructed since 2008. “The 48-month crisis may finally be coming to an end”, believes William C. Skelley – Founder and CEO of iFunding, which is an online marketplace where individual investors choose pre-vetted real estate projects and invest alongside some of the World’s most successful property owners and operators. “iFunding has brought the extremely inefficient process of raising capital for real estate online to make it more efficient and transparent. On average we only accept 1% of projects that are submitted to us. If we like a deal, most importantly the track record of the sponsor, we will underwrite it, create the legal documents and allow the investor to analyze, sign legal documents and wire money, all online via our website”.

Benefits of Direct Investing

Our team has worked in real estate for the last twenty years at some of the largest Wall Street investment firms and has been involved in over $3B of transactions. Over the years, we have developed a simpler and more cost effective platform that allows accredited investors to make direct investments in PRIME real estate WITHOUT the layers of fees in the traditional private equity structure.