Insights

CWS' blog shares insights and informative articles regarding real estate investing.

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The Howey Test, a way to determine whether a transaction is an investment contract and, therefore, a security, is an important element in a tenants-in-common (TIC) 1031 exchange. Since TIC agreements pass the Howey Test, they must receive a “private letter ruling” from the IRS before they can be used in a 1031 exchange. Investors entering into TIC agreements should understand the significance of the test for them and keep in mind the importance of registering their agreements properly.
 
Acquisition and development are the primary methods of direct investment in real estate, and they differ in many ways. Acquiring a multifamily asset with tenants through a real estate investment company could be an ideal strategy for establishing a dependable, predictable cash flow—and for preserving the investor’s wealth. Development, on the other hand, with its higher risk and faster exit, is potentially more profitable.