Meet BV Capital, providing access to passive real estate investments
Via 1031 Exchanges and DSTs
The Offer Sheet readers —
Today we’re excited to be speaking with Rob Anderson, President at BV Capital, a company that provides direct access to alternative real estate investment opportunities, in particular those for folks looking to take advantage of two tax loopholes, err benefits called 1031 Exchanges and Delaware Statutory Trusts.
We delve into the details of how 1031 Exchanges work, how you can take advantage when selling your STR investment, and how you can use a 1031 in combo with a DST to make for passive investing, not having to deal with the headaches of managing physical property on your own. Let’s go!
Many real estate investors have long known that one of the great benefits of investing in real estate is the tax advantages. Many folks know about things like depreciation, but not as many do about 1031 Exchanges and Delaware Statutory Trusts. Can you briefly explain the benefits of 1031 Exchanges, like I’m five?
A 1031 exchange allows real estate investors to take the proceeds from the sale of investment real estate and reinvest into another investment property and defer the tax on the capital gains, state tax and depreciation recapture.
What is a Delaware Statutory Trust and how can you leverage a 1031 Exchange to take full advantage of a DST?
A DST is a 1031 fund that allows real estate investors the opportunity to invest in an institutional asset on a fractional basis. These are typically properties that they couldn’t buy on their own and are managed by a Sponsor who is a professional real estate company. DSTs allow the active real estate investor to transition to a passive real estate investor while still maintaining their 1031 exchange. Many real estate investors use the DST as a way to retire so to speak from the hassles of direct ownership. Lastly, the DST is a great estate planning tool as it provides for a step up in basis to heirs.
How do REITs (Real Estate Investment Trusts) different from DSTs?
REITs are structured like a mutual fund allowing investors to buy shares of the REIT which owns a portfolio of income producing real estate. Most REITs are publicly traded like a stock and are not 1031 eligible. REIT investors receive a 1099 for the dividends they pay where a DST investor gets the benefits of the depreciation and any other losses created from their beneficial ownership in the DST just like they would if they owned an investment property.
How exactly does BV Capital allow me as an investor to take full advantage of both of these tax loopholes as far as investing goes?
We offer DSTs which are 1031 eligible. One of the challenges of 1031 exchanges is that investors have 45 days to identify potential replacement properties. Thus, if an investor can not find something they feel comfortable buying they can use the DST to satisfy their exchange and not have to lift a finger to manage it.
Real estate is typically an active investment, especially if I want to take advantage of the tax benefits. How about through BV Capital? Is it more of a passive investment vehicle?
Yes, we offer development opportunities as well as DST investments. Both are passive investments for investors. On the development side, investors own units in an LLC that owns the development or real estate. On the DST side investors own a beneficial interest in the DST which gives them a percentage ownership in an institutional property. In both scenarios, investors benefit from depreciation and any other form of passive loss that is created.
Our investments can provide diversification for the active real estate investor and allow them to leverage their capital beyond their current efforts.
What other aspects of real estate does BV Capital cover other than allowing me to invest passively into real estate and take advantage of all the tax benefits that professional investors do?
We are a developer and as such we partner with investors on land acquisition, development and construction and in the 1031 / DST market. We’ve done multifamily, student housing, industrial, medical, office and mixed use developments throughout Texas.
How does BV Capital source their own real estate investment opportunities?
We primarily only do deals in Texas as that is what we know and where our network lies. We have a reputation of being able to close on transactions that we’ve put under contract and thus we are often brought deals before they hit the market.
What is the story of BV Capital, how did the business come about and how long has it been around? Was this always the focus?
Our Founder was one of the leading real estate lenders in the country for two major banks before founding Bridgeview Real Estate and BV Capital in 2011. BV Capital is the private equity company for Bridgeview who is our sister company and the Sponsor or our DST offerings. Our focus is to provide investors with access to institutional quality real estate investments without the hassle of direct property ownership.
What’s in store for the future, as far as additional offerings and/or expansion real estate investment wise?
We have a pipeline of multifamily and mixed use development deals to meet the needs of an upcoming supply and demand imbalance in Texas as it relates to housing. More and more people are moving to Texas but new construction starts are dropping fast as it has become increasingly difficult to finance new projects. Thus, we’ll see more demand than supply over the next few years as current construction projects finish next year. This will push rents higher until this imbalance levels out which may take a few years. This is the opportunity we are taking advantage of.
Do I need to be an accredited investor to invest, and if so what are the minimum requirements?
Yes, these investments are private placements and as such investors are required to be accredited.
Are there any interesting deals / opportunities right now in particular that readers of The Offer Sheet may find intriguing?
Yes, we have several passive investment opportunities that we can visit with investors about. Please go to our website at www.bvcapitaltx.com to learn more.
Outside of the tax benefits + passive opportunity, what types of returns can investors generally expect? Any risks to keep in mind?
From a compliance standpoint, we can’t discuss returns on any specific project without sharing the PPM first as each offering will have its own risk and return metrics. However, we can share the returns on our prior deals that have gone full cycle. Our track record to date has returned in excess of 36% net IRR to investors with an average hold period of 36 months.*
*Past performance does not guarantee future performance. Investors must review the PPM and potential risk and return metrics.
How do you stand out from the competition?
We are a vertically integrated real estate company with skin in the game. We own our own construction company, and an in house broker dealer. We also have a joint venture company for property management which allows us to control how a property operates. We put our investors and financial advisor partners first as they are critical to our business.
What’s your favorite resource for novices to learn more about 1031 Exchanges and DSTs?
You can learn more at https://bvcapitaltx.com/dsts-and-1031-exchanges/.