When President Biden released his American Family Plan last week, under which Internal Revenue Code 1031 exchange real estate investors are choosing more and more to invest in social impact projects benefiting neighborhoods, communities, and our country. In recent years, up to 70% of targeted project funding needs were benefited by 1031 exchange proceeds. These included a Special Needs School in Minnesota in 2019, a Goodwill Store in Florida last year, and a Fertility Clinic in Illinois this year. Other examples include numerous Dollar General thrift stores, DaVita Kidney Care centers, CVS Pharmacies, Fresenius Medical Care dialysis centers, and Walmart’s. Since these projects are larger investment opportunities overall, aggregating multiple real estate investors’ exchange proceeds is necessary to ensure these impactful projects are completed. For the builders focused on making a social impact, 1031 exchange proceeds supporting social impact. Across the U.S., investors are recognizing the investment opportunities and the importance of securing rental properties to provide housing other than multi-family properties. During the COVID-19 pandemic, and for years to come, families will continue to seek a home as opposed to dense community living. For SFR companies that eventually sell the homes to their renters, using 1031 exchanges keeps their cost of capital low due to the deferral, which allows them to pass that on through lower rents and lower sale prices to the eventual tenant and buyer
So, for skeptics out there, first understand the rules around
