Education Archives - BV Capital

Podcast: “The Investor Blindspot” with Ross Curtis

Lauren Miles — Tue, 17 Mar 2026 20:37:39 +0000

MARCH 16, 2026 - the invest clearly podcast

A Good Deal Can Still Be a Bad Investment

Episode Summary:

Ross Curtis has spent more than 30 years in financial services and now serves as President of BV Capital. In this episode, he shares a perspective shaped by decades in capital markets, advisor relationships, and investor communication.

He shares what he’s learned from capital raising and why he believes a deal can look strong on paper and still be the wrong investment if it does not fit the investor.

In this episode, Ross and Joe discuss:

Why deal fit matters as much as deal quality
How advisor experience shaped his investor approach
Why smaller allocations can protect investors
What strong post-investment communication looks like
Why education matters more than marketing language

Start the Conversation

The post Podcast: “The Investor Blindspot” with Ross Curtis appeared first on BV Capital.

The Ground-Up Construction Advantage: Why We Build from Scratch

Lauren Miles — Wed, 05 Nov 2025 23:50:16 +0000

table of contents

Article Overview: This article examines BV Capital's approach to ground-up multifamily development, exploring how this strategy differs from traditional value-add investing. We cover the unique economic advantages, our two-phase investment structure, risk management framework, and institutional exit strategy, with particular focus on our Texas markets.

Key Topics:

Current market dynamics favoring ground-up development
Economics and financing efficiency through phased deployment
Two-phase investment structure allowing flexible entry points
Comprehensive risk management framework
Institutional exit advantages
Texas market selection criteria

The traditional value-add model in multifamily investing - buying existing properties, improving operations, and selling at a compressed cap rate - faces mounting challenges. Asset appreciation and rising debt costs have fundamentally altered risk-return dynamics, creating an environment where ground-up construction offers compelling advantages for sophisticated investors.

As an institutional developer and real estate fund manager with extensive experience across Texas markets, we have observed a clear evolution in the risk-return profile of different investment strategies. In the current market environment, value-add opportunities have become increasingly constrained by asset appreciation and rising debt costs. Properties have appreciated so substantially that the traditional model - buying at one cap rate, improving NOI, and selling at a compressed cap rate - faces significant headwinds. Meanwhile, our ground-up construction portfolio has historically delivered IRRs in the low 20s compared to low teens for value-add opportunities, with comparable risk profiles when properly structured

For BV Capital, ground-up construction is not just another investment strategy – it is a fundamental commitment to creating institutional-quality assets from inception. Our approach offers unique advantages through a two-phase investment structure that gives investors multiple entry and exit points. While stabilized properties might offer immediate cash flow, the total return potential from properly executed ground-up development can significantly exceed that of traditional value-add strategies.

This distinction becomes particularly crucial in today's market environment. Our construction financing, structured through phased draws, typically represents about 40% of the carrying costs compared to immediate full-leverage acquisition financing. This fundamental cost advantage, combined with our ability to create purpose-built institutional product, creates compelling opportunities for sophisticated investors.

As an institutional developer and real estate fund manager with extensive experience across Texas markets, we have observed a clear evolution in the risk-return profile of different investment strategies. Value-add opportunities have become increasingly constrained by asset appreciation and rising debt costs. Properties have appreciated so substantially that the traditional model - buying at one cap rate, improving NOI, and selling at a compressed cap rate - faces significant headwinds. Meanwhile, our ground-up construction portfolio has historically delivered IRRs in the low 20s compared to low teens for value-add opportunities, with comparable risk profiles when properly structured.

The Economics of Ground-Up Construction

The financial dynamics of ground-up construction differ fundamentally from traditional value-add investments in ways that create unique advantages for institutional development. Our approach centers on a core principle: creating institutional-quality assets through a carefully structured, two-phase investment process that maximizes return potential while managing risk.

At the heart of our strategy lies the spread between development yield and exit capitalization rates. We target development at approximately 6.5% to 6.75% yield on cost, with exits typically occurring at capitalization rates between 5.0% and 5.25%. This point-and-a-half spread represents a significant value creation opportunity that has remained resilient even in challenging market conditions. The inverse relationship between capitalization rates and values means that this compression directly translates into enhanced returns for our investors.

Our financing structure exemplifies the efficiency of phased development versus traditional acquisition. When acquiring an existing $50 million property, an investor immediately incurs debt service on the entire acquisition amount. In contrast, our construction draws increase gradually as the project progresses. By the time we reach full leverage, our properties are typically 50% leased, creating a significantly more favorable cash flow profile. This staged approach to capital deployment typically results in carrying costs that are 40% lower than comparable acquisition financing.

The scale of our developments is carefully calibrated to institutional demand. Our focus on 250-400 unit properties aligns precisely with the requirements of institutional buyers, who seek stabilized assets that can generate meaningful NOI within their portfolios. This strategic sizing, combined with our focus on Class A product, creates a clear path to liquidity that enhances our ability to deliver strong risk-adjusted returns.

The Two-Phase Investment Structure

Our ground-up development strategy embodies a unique approach that transforms what traditionally would be a single five-year development cycle into two distinct investment opportunities. This structure provides investors with enhanced flexibility and multiple points for both entry and exit.

1st Phase: Land Acquisition & Entitlement

The first phase focuses on land acquisition and entitlement, typically spanning a one to two-year period. During this phase, we secure strategically located sites and navigate the complex entitlement process that creates substantial value.

Instead of offering a traditional promote structure, we provide our land investors with preferred financing returns historically ranging from 12% to 20% annually, depending on the specific opportunity. This approach allows investors to participate in the critical value-creation phase of pre-development while maintaining a simplified, predictable return profile.

2nd Phase: Construction

The construction phase represents the second investment opportunity, typically spanning a three to four-year period from groundbreaking to disposition. Our construction timeline follows a precise sequence: approximately two years of physical construction, with leasing activities commencing six months before completion. This overlap optimizes the stabilization period, typically achieving full occupancy within a year of construction completion. The final six months focus on executing our institutional exit strategy.

A distinctive feature of our structure is the tax-advantaged transition between phases. While syndicated real estate investments typically cannot utilize 1031 exchanges, our structure allows land phase investors to roll their investment into the construction phase on a tax-deferred basis. This mechanism provides a compelling opportunity for investors to maintain their position through the full development cycle while deferring taxes on their initial returns.

Summary: Advantage

The two-phase approach creates significant advantages in the current market environment. Traditional five-year development deals often require investors to commit capital through both the entitlement and construction phases, regardless of their risk preferences. Our structure allows investors to participate in either phase independently or maintain involvement throughout the entire process, creating a more flexible investment framework that aligns with varying investor objectives and risk tolerances.

Risk Management in Ground-Up Development

Ground-up development presents distinct challenges that sophisticated investors must carefully evaluate. Unlike stabilized acquisitions or value-add opportunities, development projects require careful management of multiple risk factors throughout their investment cycle.

The most immediate consideration for investors is the cash flow profile. Development capital remains deployed without distributions through the entitlement and construction phases - typically two years for land investments and three years for construction. This extended period without cash flow creates opportunity cost considerations that must be weighed against the potential for higher total returns.

Entitlement Process

The entitlement process introduces timing uncertainty that can impact returns. While our relationships with municipalities across Texas provide significant advantages in navigating these challenges, the process remains subject to local political and regulatory dynamics. Even with careful planning, entitlement timelines can extend beyond initial projections, requiring additional patience from investors.

Construction Execution Matters

Construction execution presents multiple challenges that require active management. Cost inflation, supply chain disruptions, and labor availability can all impact project timelines and budgets. Our response includes careful structuring of construction contracts, strategic materials procurement, and maintenance of strong subcontractor relationships. These measures help mitigate risks but cannot eliminate them entirely.

Awareness of Market Risk

Market risk takes on particular importance in development projects due to their potentially longer timelines. While our extensive market analysis provides strong validation of current conditions, we must project three years forward to anticipate the environment at stabilization and exit. We address this through conservative underwriting and careful submarket selection, but market conditions at exit remain a key consideration for investors.

Despite these challenges, our systematic approach to risk management creates a framework for successful execution. Our two-phase structure allows investors to participate in either land or construction phases according to their risk tolerance. The land phase offers higher preferred returns over a shorter timeline but requires comfort with entitlement risk. The construction phase provides exposure to the full development cycle with institutional-quality financing structures but demands patience through the stabilization period.

Financial risk management centers on appropriate leverage and careful staging of capital deployment. We typically target loan-to-cost ratios of 70-75%, utilizing a combination of senior debt and preferred equity. This structure provides optimal flexibility while maintaining institutional-quality financing terms. Our construction draws are carefully staged to minimize carrying costs, with total interest expense typically running 40% lower than comparable acquisition financing.

The Institutional Exit Advantage

At the core of our ground-up development strategy lies a fundamental understanding: we are not just building communities – we are creating institutional-quality assets that fulfill specific requirements of major real estate investors. This focus on institutional exits shapes every aspect of our development process, from initial site selection through final execution.

The landscape of institutional multifamily buyers includes REITs, insurance companies, major family offices, and other substantial pools of capital seeking stabilized, Class A assets. These buyers represent the largest and most active segment of the multifamily market, with insurance companies alone ranking as the single largest owner of institutional real estate. This kind of institution is not seeking to create yield, they want to acquire it, making them natural partners for our development strategy.

Our development approach aligns precisely with institutional requirements. When we target a yield on cost of 6.5% to 6.75% with exits at capitalization rates between 5.0% and 5.25%, we are not merely seeking attractive returns – we are creating exactly the type of stabilized yield that institutional buyers demand. For these investors, our newly constructed Class A assets offer compelling tax-equivalent yields typically reaching the low double digits, fitting perfectly within their portfolio allocation strategies.

The size of BV developments - typically 250 to 400 units - directly reflects institutional preferences. This is not arbitrary; smaller properties often fail to generate sufficient NOI to warrant institutional attention, while larger properties can face absorption challenges in some markets. Our target range represents the sweet spot for institutional demand, particularly in our Texas markets where we maintain deep relationships with major buyers.

Alternative exit strategies, including Delaware Statutory Trust (DST) structures, provide additional flexibility when market conditions warrant. These structures can offer advantages for both our investors and potential buyers, though our primary focus remains on direct institutional sales given the superior liquidity of the Class A multifamily market.

Market Selection Criteria: Even the Advantages are Bigger in Texas

As any Alamo-remembering Texan will know, "being big" is a significant part of our collective cultural lore, giving birth to the iconic phrase, “Everything is Bigger in Texas.” Our ground-up development strategy centers on a fundamental principle: extensive market knowledge creates superior results. By focusing exclusively on Texas markets, we have developed unparalleled insight into the dynamics that drive successful multifamily development across the state's diverse submarkets.

Location selection follows strict criteria that maximize institutional appeal. Properties must be positioned within one city block of major transportation arteries, reflecting the premium that institutional investors place on accessibility. This proximity requirement is not merely about current convenience - it represents a long-term driver of asset value that institutional buyers consistently prioritize in their acquisition criteria.

Population and employment growth serve as foundational metrics in our market analysis. However, our approach goes beyond simple demographic trends. We conduct exhaustive studies of every competitive property within defined submarkets, building comprehensive databases of rental rates, occupancy patterns, and absorption trends. This data undergoes rigorous verification through direct market research, creating a detailed picture of market dynamics that informs both our development decisions and eventual exit timing.

Supply-demand dynamics receive particular attention in our analysis. We actively avoid overbuilt markets, such as current conditions in North Austin, where supply temporarily exceeds absorption capacity. This selectivity reflects our understanding that successful ground-up development requires not just strong current market conditions, but favorable dynamics through the entire development and stabilization cycle - typically spanning three years from groundbreaking to disposition.

Municipal relationships represent a critical advantage in our development process. These connections, built over years of successful project delivery, often result in preferential treatment in zoning and entitlement processes. This advantage manifests in tangible ways - from increased density allowances to reduced setback requirements - that significantly enhance project economics while maintaining architectural integrity.

Trust Through Development Excellence

These days, many sponsors claim expertise in ground-up development. Yet successful execution requires more than just construction capability - it demands a comprehensive understanding of institutional requirements, market dynamics, and risk management that can only be developed through years of successful project delivery.

BV Capital's ground-up development strategy reflects this deeper understanding. Our two-phase investment approach transforms traditional development timelines into distinct investment opportunities, each offering unique advantages for sophisticated investors. The land phase allows participation in crucial value creation through entitlement and pre-development, while the construction phase capitalizes on our ability to create institutional-quality assets that command premium valuations.

The economics are compelling. Our ability to stage capital deployment through construction draws typically reduces carrying costs by 40% compared to traditional acquisition financing. When combined with the spread between development yield and exit capitalization rates, this efficiency creates opportunities for superior risk-adjusted returns in the current market environment.

Market selection and timing remain crucial to success. Our exclusive focus on Texas markets allows us to maintain deep relationships with municipalities, understand subtle market dynamics, and identify opportunities before they become widely apparent. This focus, combined with our strict criteria for location, scale, and market conditions, creates a framework for consistent execution across market cycles.

For sophisticated investors seeking exposure to multifamily development, the choice becomes clear: partner with a firm that does not just understand construction, but comprehends the entire spectrum of institutional-quality development. Our track record of successful project delivery, combined with our systematic approach to risk management and value creation, demonstrates the advantages of professional ground-up development in today's market environment.

open development investment:

BVCAP Belton Investors

The project is known as “The Belton” and consists of an active adult development of approximately 199 units, including 16 single-story cottages. The Corinth area easily connects to other North Texas cities such as Denton, Dallas, Fort Worth, McKinney, and Plano.

View Offering

table of contents

Key Topics:

The Economics of Ground-Up Construction

The Two-Phase Investment Structure

1st Phase: Land Acquisition & Entitlement

2nd Phase: Construction

Summary: Advantage

Risk Management in Ground-Up Development

Entitlement Process

Construction Execution Matters

Awareness of Market Risk

The Institutional Exit Advantage

Market Selection Criteria: Even the Advantages are Bigger in Texas

Trust Through Development Excellence

BVCAP Belton Investors

The post The Ground-Up Construction Advantage: Why We Build from Scratch appeared first on BV Capital.

ROTH Conversion at a Discount

Lauren Miles — Thu, 12 Dec 2024 17:22:11 +0000

IRA QUICK FACTS

Traditional IRA vs Roth IRA

TRADITIONAL IRA

Invest Traditional IRA money before paying taxes
Withdrawals are required by age 73
Pay taxes when you withdraw money

ROTH IRA

Invest Roth IRA money after paying taxes
Withdrawals are never required
Withdraw money tax free

Access Roth contributions at any time, but Roth needs to be in place for 5 years in order to withdraw gains tax free
Roth IRA balances do not count in the calculation for taxing Social Security benefits, or in the calculation for the tax on investment income

Converting your IRA to a Roth IRA at a Discount

Roth IRA's are preferred due to the potential of tax-free growth, but there are limits to high income earners on contributing to a Roth. Due to this contribution limit, many want to convert some of their traditional IRA funds to a Roth IRA to maximize their Roth IRA benefits. This is commonly called a "back-door Roth IRA".

PROBLEM

High Taxes

Investors having to pay current income taxes on the converted amount from a traditional IRA to a Roth IRA as the conversion is taxed as current income.

SOLUTION

Re-Invest the Funds

Invest your traditional IRA into a ground-up construction project and convert at a discounted value due to an interim valuation.

HOW IT WORKS

New Valuation

Upon starting construction a new valuation is issued with a reduced value, allowing for a Roth conversion at a discount. To visualize this, some ground-up real estate projects have what is called a "J" curve when it comes to their valuation. See the chart below.

Example of a ROTH Conversion Through a BV Construction Project

Investing in a ground-up construction project through a traditional IRA enables an investor to convert to a Roth at a discount as the valuation could be devalued by approximately 30% during construction.

This devaluation can be caused by factors such as illiquidity, lack of transferability and initial deal costs among other factors.

Upon the sale, the value increases due to the sales price which is designed to be higher than the overall construction cost and creates a profit for investors.

The graph above is purely an example and not a projection of an actual return.

TRADITIONAL IRA TO ROTH IRA – HOW DOES IT WORK?

Below are the the steps to completing the Roth IRA conversion.

Step 1:

INVEST

An investor uses their traditional IRA to invest in this type of project.

Step 2:

CONSTRUCTION

Construction starts and a third party prepares a valuation report assessing the reduction in value.

Step 3:

VALUATION

The IRA custodian receives the third-party report and reduces the investor's value of their IRA.

Step 4:

CONVERSION

The investor initiates a Traditional IRA to Roth IRA conversion at their custodian at the reduced valuation.

Step 5: EXIT

The Construction of the development project is complete; the project is leased and reaches stabilization. Typically, Sponsors anticipate that at this stage of a project the valuation will be higher than the initial capital invested into the project. The project is then sold, and distributions are made to investors back to their Roth IRA.

*Some real estate projects create UBIT so check with your Sponsor or tax professional on how that might affect you.

Learn More

sponsor track record

Bridgeview Real Estate

Bridgeview has an established track record of developing over 1,000 multifamily units and renovating an additional 1,000 units. Combined, Bridgeview’s principals have been involved in the development, acquisition, renovation, and disposition of almost 9,000 multifamily units and 1 million square feet of commercial space as well as other real estate transactions in all, totaling more than $3 billion.

17 ASSETS

Fully Realized

+440M

Total Capitalization

33.9%*

Average Investor IRR

2.84x*

Average Investor Multiple

2,385

Units Sold

1,363

Units Developed

2,123

Units in Pipeline

36 Mo.

Average Hold Period

*Past performance is not indicative of future results. There is no guarantee that the Sponsor will be able to execute similar investments and investors risk the loss of their entire investment. Data as of January2026

The post ROTH Conversion at a Discount appeared first on BV Capital.

Should You Invest in an Inflationary Environment?

Ross Curtis — Wed, 09 Aug 2023 22:37:27 +0000

Article by: Ross Curtis, Vice President of Sales, BV Capital

One, if not the, most commonly uttered phrase of why an investor would consider adding direct real estate to their portfolio is “because it’s a hedge against inflation.” As inflation erodes your purchasing power, driving prices higher, your direct real estate values increase, keeping up with the current market. The adage “a rising tide lifts all ships” is a perfect analogy for the effect inflation has on real asset prices.

If you’re already an existing real estate owner it is great watching the value of your property rise with inflation. On the other side of the fence is the interested real estate buyer, trying to acquire in an inflationary/rising price environment. That is frustrating and leads to those in-head conversations of “Why didn’t I buy sooner” and “I shouldn’t have waited” because it costs more to buy now.

What else goes up during inflationary times? Interest rates.

Only makes sense for the cost of capital to rise alongside the asset prices, making it more expensive and restrictive to borrow money for a real estate acquisition. That’s why the Fed calls it a tightening monetary policy. So not only are those interested buyers upset that prices are up, if they get a loan to make the purchase, the cost for the debt is higher too.

This presents a very interesting dynamic on the buyer and seller front. You have real estate owners who are more likely to sell out at these higher prices and cash in. You also have interested buyers who want to purchase, but can no longer afford to. Transaction volume drops down and sellers can’t sell, buyers can’t buy, and the brokers in-between make no commissions. This is where we are now.

Two crucial points to remember in these times:

1. PAY ATTENTION TO THE DEBT TERMS

When investing into a syndicated real estate deal (with other investors), PLEASE look at the debt terms. The rate on the debt, the lock up period, the maturity date, the covenants, and the amortization or interest-only period. Why? Because your investment property owes that debt lender every month, and they get paid first.

Any revenue problems at the property level could cause steps towards the 'F word' – foreclosure. When capital costs are high, margin gets pressure. If revenues miss projections, margins get more pressure. That isn’t good for the equity investors. Look at the debt terms, look at the pro forma revenue assumptions, and understand your margin of safety in the deal. This is just one example as there are multiple risks associated with real estate investing, and the more you know about how your deal addresses those risks, the better.

2. Is it better to buy or build real estate?

Buy or build? While your desire may be to buy an asset now and start receiving cash flow immediately, today’s market environment proves challenging. Capitalization rates/yields have lowered while the associated risks are higher due to that margin of safety compression. If the risk/return ratio isn’t attractive enough, an option is to pivot to a new construction deal.

Since everything moves in cycles, when acquisitions face headwinds, development and construction are an option. Investors sacrifice immediate cash flow in the short-term, and focus on generating a higher IRR long-term between the cost of construction and future market value upon project completion.

Remember, real estate prices may be elevated today, for how long no one knows, but inflation cycles typically don’t move very fast. The current up-tick trendline is the largest since the late 1970's per the St. Louis FED chart provided.

St. Louis FED Chart

in conclusion

If interest rates remain high or continue to rise, downward pressure will be placed on real estate prices (think of that inverse relationship between fixed income price & yield). With a higher cost of capital, price reductions should follow in order to meet demand and get transaction deals done. Alternatively, if and when interest rates fall, real estate valuations will rise again. Thus, the timeframe of any potential deal as it relates to the overall economic cycle should be evaluated. Construction deals today have the potential to exit in an entirely different economic environment.

Remember your investing options – buy vs. build – doesn’t have to be one or the other, as both strategies may fit well in a well-diversified real estate portfolio for the long-term.

[1]Per CBRE, commercial real estate investment volume fell by 57% year-over-year in Q1 2023.

featured open investment - ground up construction

BVCAP NB Investors New Braunfels

Bridgeview is ready to develop The Landhaus at Gruene, a new ground up construction multifamily property in New Braunfels, TX. The property will have 410 “Class A” garden style units in the third fastest growing city in Texas. New Braunfels is ideally located in between Austin and San Antonio. The project is estimated to take 36 months.

view offering

The post Should You Invest in an Inflationary Environment? appeared first on BV Capital.

The Real Estate Investor’s Guide to DST Investments and 1031 Exchanges

Lauren Miles — Thu, 23 Feb 2023 01:50:12 +0000

table of contents

Why Consider a DST Investment?

If you are a real estate investor, you've probably heard about the DST (Delaware Statutory Trust). A DST investment is an excellent choice for 1031 real estate investors who want to invest in commercial and institutional-grade properties that they can't afford to invest in alone.

Direct real estate can be an excellent investment. However, it can also be a huge liability and time commitment, especially with the amount of hands-on work it requires. Investing in commercial real estate is a fantastic way for investors to profit and diversify their portfolios, but investments like these are typically too expensive for individual investors. Many variables need consideration, and what might seem like a simple investment could have unexpected implications.

However, DSTs make it possible for investors to access and invest in high-profile commercial real estate. DST investments are offered by sponsors who professionally manage a portfolio of properties for the passive or "fractional" investor.

The commercial real estate market presents a unique set of challenges for many investors. To help investors navigate this landscape, we've created a guide that contains the necessary information about DSTs and how you can benefit from them.

What is a DST (Delaware Statutory Trust)?

A DST (Delaware Statutory Trust) is a property ownership arrangement in which several investors each possess uncontested fractional shares in the trust's assets. According to the regulations of Delaware trust law, DSTs are legal entities.

A seasoned real estate firm, known as the sponsor, is in charge of finding and acquiring the property portfolio before establishing the Trust. The money that the DST sponsor used to purchase the building gets replaced as investors make investments through 1031 exchanges, and ultimately the investors will own the property outright as the investors beneficially own the Trust.

This indicates that investors possess a portion of the property and that no one entity owns any property component. They qualify for 1031 exchanges when the investment is made and sold because the IRS recognizes each investor's holdings as actual ownership rights.

How Do Delaware Statutory Trusts Operate?

Delaware Statutory Trusts are investment vehicles, similar to LLCs or limited partnerships that investors use to own a fraction of a commercial or high-caliber property. Simply put, a DST sponsor combines money from beneficiaries (usually accredited investors to invest in real estate).

The DST sponsor will have already purchased the commercial assets with its own money and created a trust to hold them. Every investor acquires a pro-rata portion of ownership in a DST by investing in it. This continues until each fractional investor owns the property that the DST initially purchased.

A person must be an accredited investor and be able to meet the typical $100,000 minimum investment required to become a DST beneficiary.

DST investments give investors access to:

Industrial real estate
Medical offices
Multifamily buildings
Office buildings

Retail Properties
Self-Storage Units
Senior Living, etc.

The usual hold period for DST investments lasts between 5 and 7 years, though many DSTs have different time horizons. Additionally, investors may be eligible for monthly or quarterly cash flow throughout this period. The investors will get their proportionate share of the sales profits and any profits from future appreciation upon selling the property.

Expand Your Portfolio with High-Caliber Commercial Real Estate

Investors in the past needed professional experience, a strong network, and access to significant quantities of funds. These prospects were once only accessible to hedge funds, investment professionals, and the super-wealthy. However, now any Accredited Investor can benefit from such opportunities.

BV Capital promises attention to detail, experience, and expertise to generate wealth for accredited investors who partner with us. You can eliminate the hassles associated with direct asset ownership while owning a fraction of institutional-grade properties.

How Do Delaware Statutory Trusts Operate?

A person must be an accredited investor and be able to meet the typical $100,000 minimum investment required to become a DST beneficiary.

DST investments give investors access to:

Industrial real estate
Medical offices
Multifamily buildings
Office buildings

Retail Properties
Self-Storage Units
Senior Living, etc.

Expand Your Portfolio with High-Caliber Commercial Real Estate

How DSTs Work With 1031 Exchanges

The IRS-approved arrangement known as a 1031 exchange enables real estate investors to defer paying taxes (including capital gains taxes, state income tax and depreciation recapture on the transfer of rental property). DSTs are qualified for 1031 exchanges because, in the eyes of the tax code, they qualify as direct property ownership.

For a DST to qualify for a 1031 exchange, the sale profits of the transferred property must get invested into a like-kind replacement property of comparable or superior value. This is accomplished through a Qualified Intermediary who will hold the funds in escrow and document the process. To defer tax, investors must ID a replacement property within 45 days and complete this transaction within 180 days of the old property's closing date.

Tax deferral enables DST investors to keep the equity from the property sale, allowing them to use it to their advantage in their new DST property.

What Makes DSTs a Good 1031 Exchange Option?

Using Internal Revenue Code Section 1031 to your advantage can effectively increase your ROI in real estate. While investors have traditionally used real estate to expand their portfolios, DSTs offer a passive and more streamlined and flexible approach to the same end.

Compliant with 1031 Exchanges

Every investor in a DST has a stake in the trust through their ownership interests. A 1031 exchange is possible because the IRS considers the DST investor's ownership of the security equity share ownership.

The IRS issued Revenue Ruling 2004-86 in 2004, allowing the use of a DST to purchase the property. The IRC Section 1031 recognizes each beneficiary in the trust as having a personal stake in the new property.

Professional Assistance

Investors can earn genuinely passive income from DSTs since they aren't in charge of overseeing the project freeing them up to spend their time on what they choose.

The Benefits and Drawbacks of DST Investments

DSTs are a popular investment strategy, and for a good reason. They provide numerous benefits that make them an excellent investment option for 1031 investors, but DSTs aren't without their flaws.

How do you know which investments are suitable for you? We'll cover the benefits and drawbacks of DST investments to help you decide if DSTs are suitable for you.

The Benefits and Drawbacks of DST Investments

DSTs are a popular investment strategy, and for a good reason. They provide numerous benefits that make them an excellent investment option for 1031 investors, but DSTs aren't without their flaws.

How do you know which investments are suitable for you? We'll cover the benefits and drawbacks of DST investments to help you decide if DSTs are suitable for you.

Benefits

Access to Class A Properties
Pre-packaged Securities
Great Timing for 1031 Exchanges
Diversity of Risks
Supports Estate Planning
Passive Investment
Limited Liability
Direct Property Ownership

Drawbacks

Fees
Limited Early Termination Options
Absence of control
Illiquidity

Benefits

Access to Class A Properties
Pre-packaged Securities
Great Timing for 1031 Exchanges
Diversity of Risks
Supports Estate Planning
Passive Investment
Limited Liability
Direct Property Ownership

Drawbacks

Fees
Limited Early Termination Options
Absence of control
Illiquidity

The Benefits of Delaware Statutory Trusts

Access to Class A Properties

While DSTs typically can own any type or class of real property, most assets they hold are of institutional standard. DSTs include many common commercial real estate properties such as multifamily, office, industrial and medical properties. They can even include A-list homes in affluent secondary markets and properties in significant urban regions.

Great Timing for 1031 Exchanges

Timing is a crucial factor for conducting 1031 exchanges. Investors have only 45 days after closing the sale of their surrendered assets to designate like-kind properties formally. It can be challenging to identify the right property in a lucrative market in time, which is one reason DSTs are highly attractive to 1031 exchange investors.

DST sponsors provide a pre-packaged investment vehicle with low transactional risks. The sponsors handle assessments, accounting records, due diligence, environmental reports, and leases before they ever ask passive investors to pool their funds together. Consequently, exchange investors can do their due diligence immediately and satisfy the 45-day ID deadline and the 180 days required by the 1031 exchange laws.

Supports Estate Planning

DST investors can transfer their valuable ownership stake into the Trust in favor of their beneficiaries after investing the proceeds of a property sale into the DST. The real estate holdings kept in that trust acquire a stepped-up basis at the owner's death, which means that the property's value is calculated based on the owner's death date instead of the value at its initial purchase.

Pre-packaged Securities

It is reasonably easy for investors to employ 1031 exchange money to buy one or more partial DST investments because funding and complete due diligence are in place, allowing for quick closure.

Diversity of Risks

The minimum investment amount for DSTs is typically $100,000. Therefore, accredited real estate investors can distribute their risk by working with various DST sponsors, different property types, and different geographic locations. You can invest $100,000 or more in a DST deal that focuses on industrial or retail properties and another $100,000 or more in another DST that focuses on multifamily or office buildings.

Passive Investment

DST investments provide a unique opportunity for passive income from real estate investments. In a DST, property investment managers with extensive knowledge oversee the property portfolio on the investors' behalf. Investors can earn genuinely passive income from DSTs since they aren't in charge of overseeing the project freeing them up to spend their time on what they choose.

Limited Liability

The DST structure protects investors from personal obligations that go beyond their investment.

Direct Property Ownership

Investing in DSTs has similar tax advantages to sole ownership, such as interest expense and asset depreciation.

The Benefits of Delaware Statutory Trusts

Access to Class A Properties

Great Timing for 1031 Exchanges

Supports Estate Planning

Pre-packaged Securities

It is reasonably easy for investors to employ 1031 exchange money to buy one or more partial DST investments because funding and complete due diligence are in place, allowing for quick closure.

Diversity of Risks

Passive Investment

Direct Property Ownership

Investing in DSTs has similar tax advantages to sole ownership, such as interest expense and asset depreciation.

Limited Liability

The DST structure protects investors from personal obligations that go beyond their investment.

The Downfalls of Delaware Statutory Trusts

Fees

DST investing fees are frequently imposed upfront and once more at the sale. Selling charges, broker-dealer allowances, offering and coordination costs, capital financing, and sale fees, among other things, are some examples of fees in a DST deal.

Illiquidity

DSTs are highly illiquid investments because of their extensive investment horizon, typically between five and ten years. The DST offering's growth cycle will likely have your capital tied up. Thus, only those investors who can bear having their investment held up for 5-7 years should consider investing in DSTs.

Limited Early Termination Options

Since there is no open market for divestment like there is for shares or other instruments, it can be very challenging to sell shares of a DST before the whole term of the deal.

Additionally, DSTs frequently impose limitations on the transfer of equitable interests, so you might need to obtain consent from the DST sponsor. Lastly, divestiture must adhere to securities rules because DST interests are considered private.

Absence of control

The DST business model may frustrate investors looking for hands-on opportunities where they can use their expertise to drive up asset valuations or lease rates.

DSTs are usually undertaken assets, and DST sponsors make all daily and critical operational decisions whereas passive investors have no input. You should ensure those factors are consistent with your financial beliefs.

The Downfalls of Delaware Statutory Trusts

Fees

Illiquidity

Absence of control

The DST business model may frustrate investors looking for hands-on opportunities where they can use their expertise to drive up asset valuations or lease rates.

Limited Early Termination Options

Since there is no open market for divestment like there is for shares or other instruments, it can be very challenging to sell shares of a DST before the whole term of the deal.

Fees Associated With DSTs

A DST must pay many underwriting and administrative fees when purchasing property and setting up the trust, just like other real estate investments. At the time of the offering, these expenses get repaid to DST sponsors as they were paid by the Sponsor initially.

Listed are some of the most typical fees associated with a DST:

Due diligence on the purchased property by sponsors
Obtaining a due diligence report from a third party
Commissions for marketing and distribution
Origination fees for loans

Reserve quantification through structural reports
Acquiring a tax letter to verify that the Trust is eligible for 1031 Tax-deferred exchanges

The sponsoring entity can not take part in any potential appreciation of the Trust's property investment(s) upon sale, according to the IRS-mandated structure for DSTs. Therefore, in addition to the purchase and development fees, DST sponsors may also be qualified for a share of the properties' continued cumulative operating revenue.

Who Can Invest in DSTs?

DSTs are specialized investments, and to participate in one, you need to be an accredited investor. According to the SEC, an accredited investor has $1,000,000 in assets (excluding their principal residence); or an average yearly income of more than $200,000 for the previous two years, whichever is higher; or $300,000 for a married couple filing together.

Finding DST Properties

Finding a DST could be the biggest obstacle when it comes to investing in one. Due to SEC guidelines, sponsors are limited in how they promote some DST investments to the general public. However, DST sponsors provide accredited investors with the opportunity to invest in high-profile properties by directly collaborating with brokers and 1031 experts.

The screening, purchase, and management of the properties included in each Delaware Statutory Trust are the responsibility of real estate companies referred to as DST sponsors. After purchasing the DST property, various parties conduct due diligence on the real estate and trust arrangement.

The sponsors arrange the DST deal for investors and advertise it through authorized broker dealers and RIAs who hold the required brokerage licenses to conduct DST sales on behalf of customers.

Diversify your Investment Portfolio with Private Real Estate

To keep your money growing long-term, you need to diversify your investments. And what better way to diversify your portfolio than investing in institutional-quality properties with no ongoing investor responsibilities.

At BV Capital, we provide a unique opportunity for accredited investors to invest in historically-unavailable A-list real estate. Our partner broker dealer firms carefully assess all DST sponsors and offerings ensure the investment possibilities offered align with our investor's goals.

view our dst offering

table of contents

Why Consider a DST Investment?

What is a DST (Delaware Statutory Trust)?

How Do Delaware Statutory Trusts Operate?

How DSTs Work With 1031 Exchanges

What Makes DSTs a Good 1031 Exchange Option?

The Benefits and Drawbacks of DST Investments

Fees Associated With DSTs

Who Can Invest in DSTs?

Finding DST Properties

Diversify your Investment Portfolio with Private Real Estate

view our dst offering

The post The Real Estate Investor’s Guide to DST Investments and 1031 Exchanges appeared first on BV Capital.

BV Capital Shares Expert Insights About Alternative Investments

Lauren Miles — Mon, 21 Nov 2022 23:35:24 +0000

DALLAS – Throughout their years in the business, the team behind BV Capital has seen how investors tend to be reliant on traditional investment systems. However, in most cases, it is not because they prefer to do so, but because they lack the knowledge of alternative investment opportunities.

As a real estate private equity company, BV Capital offers direct access to numerous alternative investments that were once only available to institutions such as exclusive real estate investments, 1031 exchange opportunities, and other high-value private deals. Through its services, however, the company now opens these opportunities to all Accredited Investors, Financial Advisors, Registered Investment Advisors (RIA), and Family Offices.

“Many people are feeling stressed with the precarity of current markets,” said Rob Anderson, the president of BV Capital.

“There is an increasing concern on how inflation will affect investments. Today’s volatility and lack of cash flow options make it challenging to find tax-efficient strategies that meet investors’ goals without taking on too much risk. I get it and I’ve been there. I’ve worked with some of the largest and smartest investment advisors in the country, and many of them agree that there is another way. It’s through alternative investing and most commonly through direct investment in real estate.”

Furthermore, BV Capital explains that its specialization, Commercial Real Estate, is one of the core asset classes of an alternative asset allocation.

About BV Capital

BV Capital is a member of Bridgeview family of companies based in Dallas. Founded in 2011, Bridgeview is a private veteran-owned real estate development and investment company. BV Capital offers direct investments historically only available to institutions to real estate developers and sponsors of major commercial real estate assets.

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The post BV Capital Shares Expert Insights About Alternative Investments appeared first on BV Capital.