1031 and Realty Mogul

[Larry C.]

Hi,

I want to ask are there any members who have experience with Realty Mogul investment through a 1031 exchange?  I  am currently selling a Chicago two-unit rental building that will net approximately $200k that will close in less than a month.  Realty Mogul seems like an easier way to invest the funds without a lot of time-consuming efforts in a typical exchange.  The platform indicates that there are no agents, escrow or closing costs.  I want to check with you all if anyone has experience with Realty Mogul and 1031 exchanges.  Thanks.

[Dave Foster]

@Larry C., What makes the RM model 1031 compliant is not the process.  You still must do a regular 1031 exchange.  And they cannot do the 1031 for you if they want to sell you the replacement since the QI for the 1031 exchange has to be an unrelated party except for their work on the 1031.  

What makes their model work for 1031 is their bank of replacement properties in the form of DSTs (Delaware Statutory Trusts).  These were blessed by the IRS a an appropriate 1031 replacement.  However these types of investments are available from anyone with the right securities license.  

Me personally when I see something that says "free, no fee, etc..."  I'm always skeptical.  Because of course there are fees and costs.  You just don't see them.  So what are they? How much are they? And who pays them?  

They might be the best deal in the world.  But you'll need to dig to find out if that's true.  But I hear where your desire is coming from.  And you are absolutely correct.  That in this market, selling a property and investing in some good quality DSTs through a 1031 exchange can be a very positive and relatively easy path to good cash flow.

[Larry C.]

Thanks so much Dave for your detailed response. I will keep digging into this area so I could figure out might work best in this and future situations. 

[Jonathan Klemm]

@Larry C. - I actually personally completed a 1031 exchange here in Chicago and used Midland IRA as my intermediary. It was a smooth process and worked out perfectly.

I've never heard of realty mogul but  my first thought is it sounds a little skeptical and may not provide as high of a return as a typically 1031, but maybe that comes with less work.