“Be fearful when others are greedy and greedy only when others are fearful.” Warren Buffet

An UPREIT is an UMBRELLA PARTNERSHIP REAL ESTATE INVESTMENT TRUST. This could be an investment vehicle you may want to consider, among others. If you have an investment property or properties which have earned substantial appreciation and you are looking for a more passive investment, or concerned about capital gains tax, it may be something to research.

WHAT IS AN UPREIT? Upon the sale of your apartments or any property held for investment, you could consider a Section 721 exchange. Unlike a 1031 exchange, which you are likely familiar with, this would convert your proceeds into OPERATING PARTNERSHIP UNITS which can be converted to REIT shares. REAL ESTATE INVESTMENT TRUSTS are publicly traded entities that invest in multiple types of properties as well as multiple locations. They can allow you to continue with your real estate investing career without paying the capital gains tax on profits that would probably be the case if you just took the cash. There could also be other reasons that you could avoid the capital gains tax. For example, if you had inherited the property or owned it with a spouse, or you sold at a loss, you would probably avoid gains. I am not an attorney or a CPA, so you would want to check out your specific circumstances with your professionals.

ADVANTAGES TO AN UPREIT There are a few advantages to this type of investment.

LIQUIDITY Shares of a REIT can be sold like shares of stock. Sometimes it can take months or even longer to sell a building, but not here. You could also sell some part of your shares while keeping the rest. Selling shares, however, would probably create a gain, but it could be at a time where your income was less, like after retirement.

DIVERSIFICATION. You currently own one or maybe several properties, but with a REIT you could be involved in many diversified investments which could spread out your risk.

PASSIVITY You would no longer have to fix toilets, advertise rentals or raise rents. This could allow for a more comfortable lifestyle.

DISADVANTAGES TO AN UPREIT This is an investment, wherein you are not the manager as you have been with your buildings. You don’t decide when to buy or sell an asset, when to raise rents and so on. This release of control could be difficult after many years of being “captain of the ship”. Also the investment, like any investment, could lose some or all of your funds. This is not a strategy to take lightly.

ADVICE Before you move forward with this or any investment, consult your professionals. Your real estate attorney and your CPA should be the first ones you look to for advice, but also talk to other investors and learn as much as you can about your different options and their management before you jump in. The whole idea is to put your nest egg in a more comfortable and secure position than you are in currently. If not, why make a change?

“The real value of anything you do is in the details.” Phil Jackson

What we at PRS PROPERTIES CAN DO. We can give you a good idea of the current value of your building. We can suggest changes you might want to make before sale to give you an idea what type of building you would be able to exchange into. You may decide to stay in the rental business or you may want to move into a more passive real estate investment, such as a triple net or a DSL.. We are always available to chat. We can give you referrals for professionals, such as lenders, contractors, and engineers, so that you can decide who you feel best with. We can supply you with rent and sale comparable in the area of your properties, so that you know what rental values are in your area. It is important that you know the true value of your rental units, so that you can get them rented right away at market value, or at least as much as possible with rent control restrictions. We can look at potential purchases that you may be interested in to make the property more desirable, and maybe look at potential issues that an insurer might require you to repair.

If you should decide to sell your building, we can help you exchange into a larger or smaller properties. We can even help you move into something with less management responsibilities. We can also help with getting the paperwork together for a refinance if that is your desire. We can also recommend experienced licensed contractors who can perform any repairs or installations you may need prior to selling. We can also look at your building for other easy and inexpensive changes that might allow you to get a higher value. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.

We are currently looking for “as-is” properties and are willing to purchase with low rents, deferred maintenance or even with a problem tenant in place. We can offer a 7 day escrow and all cash at closing. Give us a call. We have also put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are currently in 1031 exchanges and need to identify a replacement property before their 45 day identification period runs out.

Should you decide to put your property on the market, we will put together an aggressive, targeted and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.