Last week one of my clients said, “my plan was to 1031 exchange into a single tenant (NNN) restaurant with a corporate guarantee – if I had done that I would have no income now.” According to CNN, McDonald’s announced 200 store closures and Dunkin' Donuts announced over 800 store closures just this week alone.

In recent years, it was a popular model for multifamily landlords to sell their apartment building and exchange into a restaurant backed by a corporate guarantee. It allows landlords to jump into an investment asset that was less management intensive and minimal landlord responsibilities. Instead of paying the capital gains tax, landlords chose a different investment vehicle to park their capital.

With the recent events due to the coronavirus pandemic, it has thrown a wrench into this exchange model. We are seeing other investment alternatives become popular with during this pandemic period. While no investment product is bullet proof, below are three alternatives that our clients have brought up in conversations recently.

1. Charitable Remainder Trust

This is a tax-exempt irrevocable trust designed to reduce the taxable income of individuals. A charitable remainder trust disperses income to the trust beneficiaries for a specified period and donates the remainder to a designated charity.

2. Deferred Sales Trust

Like a 1031 exchange, this investment vehicle allows a real estate owner to defer the capital gains from a sale. The owner choses a sponsor who reinvests the 1031 exchange money into property, while at the same time guarantees a monthly earning to the owner in perpetuity.

3. Alternate Commercial Real Estate Products

While the restaurant business has been decimated, some product types are seeing growth because of COVID 19. Cold-storage and self-storage are seeing a huge spike in demand because distributors need more room to store their goods.

Each of the alternatives can have their pros & cons, but that is something that we can discuss on a call or in an email. If you are interested in learning more about these processes – please give us a call or contact Kingside Investment Group online.