Investors that want to do a 1031 exchange using a property with high debt must ensure the replacement property also has at least the same level of debt. If the investor takes proceeds from the sale of the relinquished property and pays off its debt, the investor will realize a gain and will have to pay gains taxes. To avoid gains taxes, the investor can structure finances on the replacement property so that gains are not realized. A zero cash flow DST can help with this scenario.
A zero cash flow investment might sound like an odd or even undesirable investment. However, they definitely have a purpose. When used with DSTs Lima payday loans reviews, the zero cash flow structure is to acquire one property using a high amount of leverage, typically with a loan to value of roughly 70-90%, and pay for it with projected cash flows from the property. The net cash flow is basically zero. But the end result, with time, is the acquisition of another property.