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Transforming Appreciated Rental Properties into Retirement Income

Old couple in Retirement

Being a landlord has its challenges and there comes a point when a lifestyle change may make sense.

Jim bought a Bay area apartment complex 30 years ago with an investment of $2 million and a loan of $6 million. He has since payed it off and is currently realizing net cashflow of $200,000 per year. His property is currently valued at $30 million. He is now in his golden years and his kids want him to retire and enjoy the good life. What are his options?

Jim is still actively overseeing management of the property. He is dealing with ongoing maintenance issues and tenants who fail to pay the rent. He still gets those annoying calls at night with some critical issue that needs an immediate response. He is thinking of retiring – but is not comfortable giving up a portion of his appreciated gains to Uncle Sam and does see any good places to put his money if he sells.

“With good planning and better awareness of reinvestment options, landlords can avoid taxes and, in many cases, substantially increase their income,” states Paul Getty, President and CEO of First Guardian Group (www.FGG1031.com).

After meeting with Paul and his team, Jim decided on a plan that allowed him to 1) sell his property and avoid the payment of any taxes 2) reinvest his proceeds into properties that would boost his net cash flow from $200K per year to over $1.5 million per year.

“Through properly utilizing the 1031 Exchange guidelines permitted by the IRS, Jim can defer 100% of his potential tax liabilities and reinvest his full net proceeds into properties that yield 5% to 7% net annual cash flow,” states Getty. “Furthermore, his replacement properties are managed by a third party that delivers hassle free income paid monthly which is mostly tax sheltered due to flow through of depreciation and expenses,” he added.

To answer the important question of “What do I do with my money?”  Jim decided on investing in a portfolio of properties that were each structured as a Delaware Statutory Trust (DST). DSTs are prepackaged properties that have in-place management and do not require any loan qualification. They also qualify for “like-kind” 1031 Exchange tax deferral strategies. One of the key problems solved by DSTs is the ability for investors to identify suitable replacement properties within the strict 45-day period allowed by the IRS. “At any given time, we have 15 to 25 DST options available which can be identified and closed in as little as 3-5 days,” stated Getty.

DSTs are available in all common real estate asset classes and generally provide potential first year net income ranging from 5% to 7% plus appreciation. Minimum investments can be as low as $25,000 allowing investors to diversify across multiple assets. Investors must be accredited, i.e., they must have a net worth of greater than $1 million excluding their personal residence or have annual income greater than $200,000.

For older landlords who are looking into retirement options, use of a 1031 Exchange coupled with reinvestments into DSTs could result in an attractive scenario that meets many objectives.

About :

FGG1031 is an affiliate of First Guardian Group and is headquartered in San Jose, California. Our team consists of highly experienced real estate and investment professionals who have provided services to thousands of clients across the US for more than 12 years.

At FGG1031 we specialize in providing a custom 1031 exchange experience by working with the investor one on one throughout the entire 1031 exchange process. We provide advice on selecting suitable 1031 Exchange options including properties structured as a Delaware Statutory Trust (DST) as well as access to wholly owned real estate.

Our seasoned team holds real estate and securities licenses and can provide our clients with suitable 1031 Exchange options across the US. We are dedicated to providing our clients with optimum solutions to meet their complete range of real estate needs and will provide assistance throughout the entire selection and investment process to ensure that our client’s objectives are achieved.


BIO : Paul Getty

Paul Getty is a licensed real estate broker in the state of California and Texas and has been directly involved in commercial transactions totaling over $2 billion on assets throughout the United States. His experience spans all major asset classes including retail, office, multifamily, and student and senior housing.Paul Getty’s transaction experience includes buy and sell side representation, sourcing and structuring of debt and equity, work-outs, and asset and property management. He has worked closely with nationally prominent real estate brokerage and investment organizations including Marcus Millichap, CB Richard Ellis, JP Morgan, and Morgan Stanley among others on the firm’s numerous transactions.Paul Getty also maintains a broad network of active buyers and sellers of commercial real estate including lenders, institutions, family office managers, and high net worth individuals.

Prior to founding First Guardian Group/FGG1031,Paul Getty was a founder and CEO of Venture Navigation, a boutique investment banking firm specializing in structuring equity investments made by institutions and high net worth individuals. He possesses over 25 years of comprehensive worldwide business management experience in environments ranging from early phase start-ups to multi-billion dollar corporations. His track record includes participation in IPOs and successful M&A activity that has resulted in investor returns of over $700M.

Paul Getty holds an MBA in Finance from the University of Michigan, graduating with honors, and a Bachelor’s Degree in Chemistry from Wayne State University. He is a member of Institute of Real Estate Management (IREM), a Certified Property Manager Candidate (CPM), and a member of the US Green Building Council.Paul Getty holds Series 22, 62, and 63 securities licenses and is a registered representative with LightPath Capital Inc, member FINRA /SIPC .

Paul Getty is a noted speaker, author, and actively lectures on investments and sales and management related topics. He is author of The 12 Magic Slides ,Regulation A+: How the JOBS Act Creates Opportunities for Entrepreneurs and Investors , and Tax Deferral Strategies Utilizing the Delaware Statutory Trust (DST), available on Amazon and other retail outlets.

There is no guarantee that any strategy will be successful or achieve investment objectives. All real estate investments have the potential to lose value during the life of the investments. This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum.

This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This material contains information that has been obtained from sources believed to be reliable. However, FGG1031, First Guardian Group, LightPath Capital, Inc., and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies, declining market values, potential loss of entire investment principal.

Past performance is not a guarantee of future results: potential cash flow, potential returns, and potential appreciation are not guaranteed in any way and adverse tax consequences can take effect.  The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. All financed real estate investments have a potential for foreclosure. Delaware Statutory Trust (DST) investments are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments. Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions. Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits.

IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes; therefore, you should consult your tax and legal professional for details regarding your situation. Securities offered through registered representatives of LightPath Capital, Inc. Member FINRA / SIPC. FGG1031, First Guardian Group, and LightPath Capital, Inc. are separate entities.

DST 1031 properties are only available to accredited investors (generally described as having a net worth of over one million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than five million dollars). If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney prior to considering an investment. You may be required to verify your status as an accredited investor. Member of LightPath Capital, Inc.

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