When planning an investment, it’s important to understand the impact it will have for you financially and the time and effort required to oversee that investment. What if one could alleviate the entire burden of ownership without losing the financial component? What value would you place on having more time with the people you love or doing what you love?
When selling property and seeking to defer tax, investors often consider 1031 exchanges, Delaware Statutory Trusts or UPREIT transactions. While those offerings enable owners to defer tax, they may have some shortfalls, including time constraints, high fees, single asset risk, and/or public market volatility. While partnering with MLG Capital to navigate the waters of a 1031 exchange could be a better alternative than conventional tax-deferred solutions, an even better idea may be to partner with MLG Capital and contribute your property to the Legacy Fund.
Unlike our series of closed-end funds, like Private Fund V, the Legacy Fund is perpetual and designed to allow accredited investors to contribute real property into the fund. It’s a compelling exit strategy for high-net-worth investors with appreciated real estate assets. There are three main benefits to contributing to the Legacy Fund.
- Passive Ownership
- Diversification
- Tax Efficiency
One of the most intriguing benefits for investors contributing property is a move from active to passive ownership. The Legacy Fund helps us relieve you of that day-to-day burden of being a landlord. No more time spent managing the asset, negotiating with vendors, or handling tenant complaints. MLG has 34+ years of investment and property management experience to draw from, and the infrastructure in place to do it well.
When owning a single asset, you assume all the inherent risk of that property. One of the ways to lower your risk is to invest in multiple properties. Spreading risk through numerous assets, across differing property types and geographies is a key benefit of the Legacy Fund. Very simply, contributing your property can offer you units in a diversified fund which makes quarterly distributions based on available cash.
Lastly, there are potential tax benefits for investors contributing property to the Legacy Fund. Generally speaking, contributions to the Fund are tax-deferred under section 721 of the IRS code.
Furthermore, investors may recognize tax savings from the Legacy Fund’s overall performance and utilization of depreciation. Contributing to the Legacy Fund can also provide marked benefits when used as a part of a comprehensive estate plan, with the added benefit of potential estate tax savings.
The Legacy Fund offers flexibility and liquidity for investors and their heirs if either would like to cash out of the fund through a unit redemption process.
The Legacy Fund is the first of its kind and growing rapidly. If you’re an accredited investor with property and looking for an exit strategy, you can achieve passive ownership, tax benefits and a more diversified portfolio of assets if you decide to contribute your asset to the Legacy Fund.
Billy Fox, CPA is Senior Vice President at MLG Capital. He works closely with clients seeking a tax-deferred exit strategy from their real estate holdings. He is always ready for a round of golf and loves to spend time in northern Wisconsin.
An investment in the Fund, Legacy Fund, Co-Investment or 1031 Exchange Program is subject to risks and uncertainty many of which are not outlined herein including, without limitation, risks involved in the real estate industry such as market, operational, interest rate, occupancy, inflationary, natural disasters, capitalization rate, regulatory, tax and other risks which may or may not be able to be identified at this time and may result in actual results differing from expected. Please review the private placement memorandum for this offering (specifically sections 8, 9, 10, and 11) for further detail describing such risks.
Private investments are highly speculative, illiquid, may involve a complete loss of capital, and are not suitable for all investors. Past performance is not indicative of future results. Prospective investors should conduct their own due diligence and are encouraged to consult with a financial advisor, attorney, accountant, and any other professional that can help them to understand and assess the risks associated with any investment opportunity.
Securities offered through North Capital Private Securities, member FINRA/SIPC.
