Joint Ownership Investments & 1031 Exchanges

If you’re an investor who’s successfully used the power of a 1031 exchange to reduce your capital gains tax liability and grow your portfolio, you may be wondering “what’s next?” After all, the tax savings is great and you’ve steadily increased the value of your properties along the way.

Perhaps now is the time to consider a more sophisticated investment. Something with more potential ROI and less daily headaches sounds appealing, doesn’t it?

But what is out there? One possible answer may be with fractional or co-ownership investments. Vehicles like Delaware Statutory Trusts or Tenancies in Common allow groups of investors to pool their resources and purchase more expensive – and potentially more lucrative – pieces of investment real estate than they could do on their own.

But one question any investor new to the world of DSTs and TICs may be wondering is how many other investors will they be sharing ownership with? While every individual transaction will vary, there are some maximum limits to ownership that anyone considering fractional ownership should understand.

Tenancies in Common – For 1031 exchange purposes, the maximum number of investor is capped at 35.

Delaware Statutory Trusts – Again, for purposes of a 1031 exchange, the maximum number of investors is 499.

While these may seem like high numbers to an investor used to single-owner investments, it is important to remember that the higher number of investors means the more resources available for purchasing premium commercial real estate.