Choosing the Right 1031 TIC Syndicator or Exchange Firm

Six months into our research, we do think that the new options available under the loosened 1031 law can very powerful vehicles for personal investors.  We've talked about this in the prior posts, but these new 1031 options allow investors to diversify geographically, to eliminate management (through exchanging into triple net leases), to increase yields (particularly if you are exchanging away from the low cap rate geographies like the Bay Area), and to reduce principal and tenant risk (if you are exchanging into institutional properties). 

That's great in theory, but how does play out where the rubber hits the road?  We're beginning to research actual firms that provide 1031 exchange options and our advice is be careful and really do your homework.  This is a new industry, and while there are some reputable firms, we've certainly found plenty of fly-night operations. 

To help you do your homework, we've created (and will update as we continue to do our research) a diligence list of good questions to answer before working with a 1031 syndicator.  As always, consult your financial and tax advisor.

Firm Due Diligence Checklist Link

Please also help us with this effort.  We're looking to launch a feedback project (find out more link) on 1031 service providers.  If you think this would be valuable, please post  comment or email us at nesteggemail@gmail.com. 

Comments

[James Brennan, Esq.]

Always look at a firms E & O coverage, fidelity bond status, and public records. For instance, North American Exchange is a subsidiary of a publicly traded company (Nasdaq:CCBI). In the public records you can find significant information on a company's risks, managers, and financial resources.

[Chris Starke]

I've heard a few horror stories, but the most common problem I've encounted is infamiliarity with exchanges at a professional level. But this has gotten better.

James' comment above is excellent. Use professionals, ask about their reputation/track record and verify that they are bonded/insured.