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Improvement and Reverse 1031 Exchanges in Fast Moving Texas Real Estate Markets

reverse exchange

04/28/21

The 1031 exchange rules provide alternatives to the traditional exchange that can be beneficial in places like Dallas or Austin, Texas ...

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In considering selling an investment property in a fast-moving real estate market through a 1031 exchange, owners are rightfully concerned about finding a suitable replacement property. The 45-day identification rules under a 1031 tax deferred exchange can feel like too small a window when supply is limited and there many bidders in the market. (To read more about 1031 exchange process and rules, visit our <a href="https://www.accruit.com/property-owners/1031-exchange-explained" title="1031 Exchange Explained">1031 explained</a> page) In places like Dallas or Austin, Texas attractive properties will receive multiple offers on the first day of listing and can go pending same day. In a fast-paced real estate market, investors are left wondering what do you do when you still want to defer your taxable gain while taking advantage of a fast-paced real estate market from a seller's perspective?<o:p></o:p>

Luckily, the <a href="https://www.accruit.com/property-owners/1031-exchange-explained" title="1031 exchange rules">1031 exchange rules</a> provide alternatives to the traditional exchange that can be beneficial in a tight market. These alternatives are deemed Reverse 1031 Exchanges and Improvement 1031 Exchanges.  <o:p></o:p>

<h2>Reverse 1031 Exchanges</h2>

Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence is often referred to as a “<a href="https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex…; title="reverse 1031 exchange">reverse 1031 exchange</a>”.  <o:p></o:p>

The reverse exchange technique essentially consists of an exchange facilitator holding or “parking” title to the new property on behalf of the taxpayer to avoid the taxpayer having simultaneous ownership of two properties. Immediately after the sale of the old property (but no later than 180 days) the exchange company affiliate transfers the new property to the taxpayer. This 'technically' creates the proper sequence.<o:p></o:p>

For example, an investor holding a commercial investment property in Dallas, Texas is looking to take advantage of the market to sell their property but is concerned about finding the right replacement property in Fort Worth. That investor decided to wait to list their property and found the perfect property replacement 60 days later and purchased it through a Reverse Exchange with the help of an exchange facilitator. Upon closing on the new purchase, the investor can now continue earning rental income on the Dallas property and has 180 days to close on the sale to defer their gain into the newly purchased Fort Worth property.  <o:p></o:p>

<h2>Build-to-Suit or Improvement Exchange</h2>

Build-to-Suit, also known as Construction-to-Suit or <a href="https://www.accruit.com/blog/can-property-improvement-costs-be-part-103…; title="improvement exchange">Improvement Exchange</a> refers to a type of exchange done where some of the proceeds of the sale of the relinquished property will be used to complete improvements on the replacement property so that the taxpayer can finalize the exchange where both the value of the land and the enhanced improvements will count for the amount the taxpayer traded for. Investors may want to build on raw land or put in new heating, ventilating, air conditioning, roof, and windows on an existing property. All of which can qualify if executed properly.<o:p></o:p>

In this type of exchange, the exchange facilitator parks the replacement property on behalf of the taxpayer while the desired improvements are made. Upon the earlier 180 days or the completion of the improvements, the entire value of the real property and improvements is conveyed directly to the taxpayer to complete their exchange.<o:p></o:p>

As an example, an investor owns an office building in Austin, Texas and wants to invest in multi-family units in Houston. However, the only multi-family complexes for sale need significant improvements to command a premium rental income. The investor can engage an exchange facilitator to consummate an <a href="https://www.accruit.com/blog/case-study-property-improvement-exchange-r…; title="improvement exchange of real estate">improvement exchange of real estate</a> whereby the purchase price and improvements to the new multi-family complex can be funded through the tax deferred proceeds of the sale of the commercial property in Austin.  <o:p></o:p>

As you can see, tools are available to real estate investors to defer taxes and grow their portfolios in any environment. Accruit is well versed in executing all types of exchanges. You can reach our Headquarters in Denver, Colorado or our Texas Regional Office in Dallas by calling (800) 237-1031 or emailing <a href="mailto:info@accruit.com">info@accruit.com</a> for more information. <o:p></o:p>

<o:p></o:p>

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Improvement and Reverse 1031 Exchanges in Fast Moving Texas Real Estate Markets

reverse exchange

04/28/21

The 1031 exchange rules provide alternatives to the traditional exchange that can be beneficial in places like Dallas or Austin, Texas ...

Reverse and Improvement 1031 Exchanges in Red-hot Real Estate Markets like LA

1031 exchange rules

04/28/21

The 1031 exchange rules provide alternatives to the traditional exchange that can be beneficial in places like Los Angeles or San ...

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In considering selling an investment property in a red-hot real estate market through a 1031 exchange, owners are rightfully concerned about finding a suitable replacement property. The 45-day identification rules under a 1031 tax deferred exchange can feel like too small a window when supply is limited and there many bidders in the market. (To read more about 1031 exchange process and rules, visit our <a href="https://www.accruit.com/property-owners/1031-exchange-explained" title="1031 explained">1031 explained</a> page) In places like Los Angeles or San Diego, California attractive properties will receive multiple offers on the first day of listing and can go pending same day. In a fast-paced real estate market, investors are left wondering what do you do when you still want to defer your taxable gain while taking advantage of a fast-paced real estate market from a seller's perspective?

Luckily, the <a href="https://www.accruit.com/blog/1031-like-kind-exchanges-myths-vs-realitie…; title="1031 exchange rules">1031 exchange rules</a> provide alternatives to the traditional exchange that can be beneficial in a tight market. These alternatives are deemed Reverse 1031 Exchanges and Improvement 1031 Exchanges.

Reverse 1031 Exchanges

Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence is often referred to as a “<a href="https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex…; title="reverse 1031 exchange">reverse 1031 exchange</a>”.

The reverse exchange technique essentially consists of an exchange facilitator holding or “parking” title to the new property on behalf of the taxpayer to avoid the taxpayer having simultaneous ownership of two properties. Immediately after the sale of the old property (but no later than 180 days) the exchange company affiliate transfers the new property to the taxpayer. This 'technically' creates the proper sequence.

For example, an investor holding a single-family rental property in Los Angeles, California is looking to take advantage of the market to sell their property but is concerned about finding the right replacement property in Anaheim. That investor decided to wait to list their property and found the perfect property replacement 60 days later and purchased it through a Reverse Exchange with the help of an exchange facilitator. Upon closing on the new purchase, the investor can now continue earning rental income on the Los Angeles property and has 180 days to close on the sale to defer their gain into the newly purchased Anaheim property.

Build-to-Suit or Improvement Exchange

Build-to-Suit, also known as Construction-to-Suit or <a href="https://www.accruit.com/blog/can-property-improvement-costs-be-part-103…; title="improvement exchange">Improvement Exchange</a> refers to a type of exchange done where some of the proceeds of the sale of the relinquished property will be used to complete improvements on the replacement property so that the taxpayer can finalize the exchange where both the value of the land and the enhanced improvements will count for the amount the taxpayer traded for. Investors may want to build on raw land or put in new heating, ventilating, air conditioning, roof, and windows on an existing property. All of which can qualify if executed properly.

In this type of exchange, the exchange facilitator parks there placement property on behalf of the taxpayer while the desired improvements are made. Upon the earlier 180 days or the completion of the improvements, the entire value of the real property and improvements is conveyed directly to the taxpayer to complete their exchange.

For example, an investor owns an apartment rental in San Diego, California and wants to invest in single-family rentals. However, the only single-family rentals for sale need significant improvements to command a premium rental income. The investor can engage an exchange facilitator to consummate an <a href="https://www.accruit.com/blog/case-study-property-improvement-exchange-r…; title="improvement exchange of real estate">improvement exchange of real estate</a> whereby the purchase price and improvements to the new multi-family complex can be funded through the tax deferred proceeds of the sale of the apartment rental.

As you can see, tools are available to real estate investors to defer taxes and grow their portfolios in any environment. Accruit is well versed in executing all types of exchanges. You can reach our offices by calling (800) 237-1031 or emailing <a href="mailto: info@accruit.com" title="info@accruit.com">info@accruit.com</a> for more information.

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Title:

Reverse and Improvement 1031 Exchanges in Red-hot Real Estate Markets like LA

1031 exchange rules

04/28/21

The 1031 exchange rules provide alternatives to the traditional exchange that can be beneficial in places like Los Angeles or San ...

Reverse and Improvement 1031 Exchanges in Hot Florida Real Estate Markets

reverse exchange

04/28/21

The 1031 exchange rules provide alternatives to the traditional exchange that can be beneficial in places like Miami or Jacksonville, Florida ...

Body:

In considering selling an investment property in a red-hot real estate market through a 1031 exchange, owners are rightfully concerned about finding a suitable replacement property. The 45-day identification rules under a 1031 tax deferred exchange can feel like too small a window when supply is limited and there many bidders in the market. (To read more about 1031 exchange process and rules, visit our <a href="https://www.accruit.com/property-owners/1031-exchange-explained" title="1031 explained">1031 explained</a> page) In places like Miami or Jacksonville, Florida attractive properties will receive multiple offers on the first day of listing and can go pending same day. In a fast-paced real estate market, investors are left wondering what do you do when you still want to defer your taxable gain while taking advantage of a fast-paced real estate market from a seller's perspective?

Luckily, the <a href="https://www.accruit.com/blog/1031-like-kind-exchanges-myths-vs-realitie…; title="1031 exchange rules">1031 exchange rules</a> provide alternatives to the traditional exchange that can be beneficial in a tight market. These alternatives are deemed Reverse 1031 Exchanges and Improvement 1031 Exchanges.

Reverse 1031 Exchanges

Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence is often referred to as a “<a href="https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex…; title="reverse 1031 exchange">reverse 1031 exchange</a>”.

The reverse exchange technique essentially consists of an exchange facilitator holding or “parking” title to the new property on behalf of the taxpayer to avoid the taxpayer having simultaneous ownership of two properties. Immediately after the sale of the old property (but no later than 180 days) the exchange company affiliate transfers the new property to the taxpayer. This 'technically' creates the proper sequence.

For example, an investor holding a commercial investment property in Jacksonville, Florida is looking to take advantage of the market to sell their property but is concerned about finding the right replacement property in Tampa Bay. That investor decided to wait to list their property and found the perfect property replacement 60 days later and purchased it through a Reverse Exchange with the help of an exchange facilitator. Upon closing on the new purchase, the investor can now continue earning rental income on the Jacksonville property and has 180 days to close on the sale to defer their gain into the newly purchased Tampa Bay property.

Build-to-Suit or Improvement Exchange

Build-to-Suit, also known as Construction-to-Suit or <a href="https://www.accruit.com/blog/can-property-improvement-costs-be-part-103…; title="improvement exchange">Improvement Exchange</a> refers to a type of exchange done where some of the proceeds of the sale of the relinquished property will be used to complete improvements on the replacement property so that the taxpayer can finalize the exchange where both the value of the land and the enhanced improvements will count for the amount the taxpayer traded for. Investors may want to build on raw land or put in new heating, ventilating, air conditioning, roof, and windows on an existing property. All of which can qualify if executed properly.

In this type of exchange, the exchange facilitator parks there placement property on behalf of the taxpayer while the desired improvements are made. Upon the earlier 180 days or the completion of the improvements, the entire value of the real property and improvements is conveyed directly to the taxpayer to complete their exchange.

For example, an investor owns an apartment rental in Miami, Florida and wants to invest in single-family rentals. However, the only single-family rentals for sale need significant improvements to command a premium rental income. The investor can engage an exchange facilitator to consummate an <a href="https://www.accruit.com/blog/case-study-property-improvement-exchange-r…; title="improvement exchange of real estate">improvement exchange of real estate</a> whereby the purchase price and improvements to the new multi-family complex can be funded through the tax deferred proceeds of the sale of the apartment rental.

As you can see, tools are available to real estate investors to defer taxes and grow their portfolios in any environment. Accruit is well versed in executing all types of exchanges. You can reach our offices by calling (800) 237-1031 or emailing <a href="mailto: info@accruit.com" title="info@accruit.com">info@accruit.com</a> for more information.

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Title:

Reverse and Improvement 1031 Exchanges in Hot Florida Real Estate Markets

reverse exchange

04/28/21

The 1031 exchange rules provide alternatives to the traditional exchange that can be beneficial in places like Miami or Jacksonville, Florida ...

Reverse and Improvement 1031 Exchanges in Hot Real Estate Markets

04/20/21

What do you do when you still want to defer your taxable gain while taking advantage of a hot real ...

Body:

In considering selling an investment property in a hot real estate market through a 1031 exchange, owners are rightfully concerned about finding a suitable replacement property. The 45-day identification rules under a <a href="https://www.accruit.com/blog/%C2%ADare-tax-deferred-exchanges-real-esta… tax deferred exchange</a> can feel like too small a window when supply is limited and there are many bidders in the market. (To read more about 1031 exchange process and rules, visit our <a href="https://www.accruit.com/property-owners/1031-exchange-explained" title="1031 Exchange Explained">1031 exchange explained</a> page) In places like Denver, Colorado or Salt Lake City, Utah attractive properties will receive multiple offers on the first day of listing and can go pending same day. So, what do you do when you still want to defer your taxable gain while taking advantage of a hot real estate market from a seller's perspective?<o:p></o:p>

Luckily, the <a href="https://www.accruit.com/property-owners/1031-exchange-explained">1031 exchange rules</a>  provide alternatives to the traditional exchange that can be beneficial in a tight market. These alternatives are deemed Reverse 1031 Exchanges and Improvement 1031 Exchanges.  <o:p></o:p>

<o:p></o:p>

<h3 class="MsoNormal">Reverse 1031 Exchanges<o:p></o:p></h3>

Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence is often referred to as a “<a href="https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex… 1031 exchange</a>” and codified in the tax code.  <o:p></o:p>

The reverse exchange technique essentially consists of an exchange facilitator holding or “parking” title to the new property on behalf of the taxpayer to avoid the taxpayer having simultaneous ownership of two properties. Immediately after the sale of the old property (but no later than 180 days) the exchange company affiliate transfers the  new property to the taxpayer. This 'technically' creates the proper sequence.<o:p></o:p>

For example, an investor holding a multi-family rental property in Denver is looking to take advantage of the hot market to sell their property but is concerned about finding the right replacement property in Colorado Springs. That investor decided to wait to list their property and found the perfect property replacement 60 days later and purchased it through a Reverse Exchange with the help of an exchange facilitator. Upon closing on the new purchase, the investor can now continue earning rental income on the Denver property and has 180 days to close on the sale to defer their gain into the newly purchased Colorado Springs property.  <o:p></o:p>

<h3 class="MsoNormal">Build-to-Suit or Improvement Exchange<o:p></o:p></h3>

Build-to-Suit, also known as Construction-to-Suit or <a href="https://www.accruit.com/blog/can-property-improvement-costs-be-part-103… Exchange</a> refers to a type of exchange done where some of the proceeds of the sale of the relinquished property will be used to complete improvements on the replacement property so that the taxpayer can finalize the exchange where both the value of the land and the enhanced improvements will count for the amount the taxpayer traded for. Investors may want to build on raw land or put in new heating, ventilating, air conditioning, roof, and windows on an existing property. All of which can qualify if executed properly.<o:p></o:p>

In this type of exchange, the exchange facilitator parks the replacement property on behalf of the taxpayer while the desired improvements are made. Upon the earlier 180 days or the completion of the improvements, the entire value of the real property and improvements is conveyed directly to the taxpayer to complete their exchange.<o:p></o:p>

As an example, an investor owns a commercial property in Salt Lake City and wants to invest in new vacation rental units in Park City. However, the only homes for sale need significant improvements to command a premium rental income. The investor can engage an exchange facilitator to consummate an <a href="https://www.accruit.com/blog/case-study-property-improvement-exchange-r… exchange of real estate</a> whereby the purchase price and improvements to the vacation rental properties can be funded through the tax deferred proceeds of the sale of the commercial property in Salt Lake City.  <o:p></o:p>

As you can see, tools are available to real estate investors to defer taxes and grow their portfolios in any environment. <a href="https://www.accruit.com/" title="Accruit">Accruit</a> is well versed in executing all types of exchanges. You can reach our Headquarters in Denver, Colorado or our Western Regional Office in Dillion, Montana by calling (800) 237-1031 or emailing <a href="mailto:info@accruit.com">info@accruit.com</a> for more information. <o:p></o:p>

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Title:

Reverse and Improvement 1031 Exchanges in Hot Real Estate Markets

04/20/21

What do you do when you still want to defer your taxable gain while taking advantage of a hot real ...

What are my 1031 Exchange Depreciation Options?

04/15/21

The benefits of 1031 exchanges (and drawbacks) are well-known throughout the real estate investor community, but managing depreciation through the exchange ...

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Having been in the tax code for over 100 years, real estate investors have come to appreciate the value of a 1031 exchange to defer taxes on gains and depreciation recapture.  Savvy investors have come to imbed this tax strategy into their process to lower the cost of capital and reliance on bank lending. Thus, increasing their returns.  The benefits also creep through to the overall economy through the multiplier effect on other industries involved in real estate transactions and subsequent property improvements.    <o p=""></o>

<a href="https://www.accruit.com/blog/costs-and-considerations-when-performing-1…; title="The benefits of 1031 exchanges">The benefits of 1031 exchanges</a> (and drawbacks) are well-known throughout the real estate investor community, but managing depreciation through the exchange is not as well understood and can be complicated.  However, in working through the administrative headaches, individuals can maximize their depreciation and increase their free cash flow.

<h3>Understanding Real Estate Cost Basis Through a 1031 Exchange</h3>

When transacting real estate through a 1031 exchange, also known as a <a href="https://www.accruit.com/property-owners/1031-exchange-explained" title="like kind exchange">like kind exchange</a>, depreciation becomes a bit more complex than transacting in a taxable manner. That is because the purpose of the 1031 exchange from its inception in the tax code ensures continuity of investment. Essentially, it should feel like a transaction never took place and, the original investment, along with its adjusted cost basis and depreciation schedule, should carry through to the new asset. If the replacement property costs more than the relinquished property, that cost will need to add to the adjusted cost basis for depreciation. An investor cannot restart a new 27.5-year depreciation schedule on the cost basis of the replacement asset after a <a href="https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex… exchange</a>.

For example, an investor purchases a single-family residential property for $200,000, and 3-years later decides to sell the property for $250,000. In those three years, the investor took $22,000 in depreciation (this figure is rounded up slightly from actual deprecation for simplicity) for an adjusted cost basis of $178,000. The investor then must add the total depreciation ($22,000) to the gain ($50,000) to come up with their funds exposed to taxation through a taxable sale ($72,000). Since the investor intends to reposition their real estate holdings, they can defer taxation on the $72,000 through a 1031 exchange. The investor decides to purchase a new residential rental property in a rapidly changing neighborhood for $300,000. The new cost basis of investment must carry over from the original property. The increased value must be added and the cost basis of the new property is the non-depreciated amount from the original investment ($178,000) plus the price increase over the relinquished property ($50,000) for a total cost basis for the new property of $228,000.

<h3>There are two ways to depreciate real estate post 1031 Exchange</h3>

Post-1031 exchanges the tax code states that you must split depreciation into two separate schedules as the preferred method. However, investors can opt-out of two schedule depreciation and depreciate the calculated cost basis on a single schedule. The latter method is typically what real estate investors pursue due to its simplicity, but they are leaving significant cash flow benefits on the table over time and at scale.

<h3>Single Schedule Depreciation</h3>

In choosing to pursue single schedule depreciation, the investor is opting out of the preferred tax code method and added benefits of two schedule depreciation in the interest of simplicity. Depreciating through this method is simple as you take the new adjusted cost basis of the asset, $228,000 in the example, and divide by 27.5 years (39 years if it’s a commercial property) to come up with the annual depreciation going forward.

<h3>Two Schedule Depreciation (also referred to as Step-in-the-Shoes Depreciation)</h3>

Two schedule or Step-in-the-Shoes depreciation is the tax code preferred method and has significant benefits to the investor if they can overcome the complexity. Any remaining depreciation from the relinquished property needs to continue on the original schedule through this method,

<ul>
<li>In the example provided, the investor held the property for 3-years before the exchange and had an adjusted cost basis of $178,000. This remaining $178,000 would then continue to depreciate for the remaining 24.5 years on the original schedule of $7,273 annually.</li>
<li>The cost basis of the replacement property remaining, will depreciate on a new and separate 27.5-year schedule. In the example provided, the added cost basis of the replacement property is $50,000.
<ul>
<li>The annual depreciation for this portion of the cost basis is $1,818 ($50,000 / 27.5).</li>
</ul>
</li>
</ul>

<h3>Benefits of Two Schedule Depreciation or Step-in-the-Shoes</h3>

The benefits of the two schedules / Step-in-the-Shoes depreciation method are apparent when comparing the annual depreciation figures. Annual depreciation in this example for single schedule depreciation is $8,291. For two schedule depreciation, that figure grows to $9,091 or an $800 increase in tax shielding depreciation for the next 24.5 years. Now a cynic might state that the gain is only temporary as the higher depreciation shield disappears after 24.5 years in this example, that individual would not understand the time value of money (cash today is worth more than cash in the future), and the compounding benefits of leveraging Step-in-the-Shoes depreciation at scale.

<h3>Choosing a Depreciation Schedule through 1031 Exchange</h3>

The reason investors opt-out of the preferred method of two schedule depreciation through a 1031 exchange is it can get complex. The complexity only grows when you begin to add more properties to the portfolio and the number of transactions increases as years go on. With this added complexity of two schedule depreciation, there is an added benefit in a higher early tax shield on the investment. For investors who own large portfolios of assets, the cash flow benefit can be tremendous and serve as a finance source to continue to grow their investment portfolio. Balancing complexity with the higher return will be unique to each investor and they should consult their tax advisors before moving forward with either schedule.

Accruit is a <a href="https://www.accruit.com/property-owners/work-with-us" title="1031 Exchange Qualified Intermediary">1031 Exchange Qualified Intermediary</a> and facilitates 1031 exchanges. Always consult your CPA or tax advisor for advice pertaining to your specific tax situation. For more information, visit <a href="https://www.accruit.com/" title="www.accruit.com">www.accruit.com</a> or call (800) 237-1031.
<a href="https://info.accruit.com/start-an-exchange">
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Metatags:

Title:

What are my 1031 Exchange Depreciation Options?

04/15/21

The benefits of 1031 exchanges (and drawbacks) are well-known throughout the real estate investor community, but managing depreciation through the exchange ...

What are Special Member, Independent Manager and Springing Member Services?

special member services

03/12/21

What is a special member, and why should you consider using one? In an effort for lenders to protect themselves ...

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Special Member or Independent Manager services provide bankruptcy remoteness to lenders, isolating them from any potential insolvency or bankruptcy risks in commercial real estate financing transactions.  When making real estate loans, lenders have a first mortgage on the property so that, in the event of a borrower default, the lender does not risk losing its security interest or position. However, just being subject to the bankruptcy proceedings can impede the lender’s efforts to take the property back. For this reason, the lender’s loan commitment letter typically will require the use of a new special purpose entity (SPE) LLC created by the borrower to hold title to the property. In order to prevent this type of SPE LLC from bankruptcy, a separate party, a “Special Member,” is inserted into the LLC’s operating agreement, whose accordance is required in filing bankruptcy. The operating agreement further stipulates that the special member agrees in advance not to allow the property to go bankrupt. This practice first appeared in the commercial mortgage-backed securities (CMBS) market about twenty years ago, and it was found that the loans that had adopted this bankruptcy remote feature were rated more favorably by ratings agencies like Standard & Poor’s (S&P). Conventional institutional lenders, such as large insurance companies and pension funds, quickly determined that their loans would also be best served if they also had a bankruptcy remote nature.

At times, the lender will require a Springing Member.  Unlike the Special Member or Independent Manager, the role of the Springing Member only arises when there is only a single member remaining in the LLC and that member ceases to remain a member for reasons such as that person’s death.  The Springing member “springs into action” and becomes a Special Member to avoid the LLC’s dissolution otherwise due to the fact that the last member ceased to be a member.

Although these entities receive compensation on an annual basis for acting or remaining ready to act in their particular capacity, they have no interest in the profits or losses of the LLC and are not otherwise treated as a regular member.

To learn more about special member, independent manager, and springing member services, contact Accruit by emailing <a href="mailto: info@accruit.com" title="info@accruit.com">info@accruit.com</a> or calling <a href="tel:8002371031" tabindex="-1">(800) 237-1031</a> today!

Metatags:

Title:

What are Special Member, Independent Manager and Springing Member Services?

special member services

03/12/21

What is a special member, and why should you consider using one? In an effort for lenders to protect themselves ...

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