How a 721 Works

We begin with a comprehensive discovery call to explore your investment goals, tax deferral needs, and long-term objectives. You’ll provide details about your property—such as its location and current income stream—and we’ll assess whether it aligns with our fund’s investment criteria.

This step typically takes 30–60 minutes and includes a preliminary discussion of your financial situation, such as potential capital gains tax exposure and estate planning considerations. Our goal is to confirm that a 721 exchange matches your vision, whether you’re aiming to reduce management duties or diversify your portfolio.

Based on our initial consultation, we develop a tailored proposal and preliminary term sheet customized to your property and goals. These documents include:

• Estimated unit allocation: The number of ownership units you’re likely to receive in the fund, based on a preliminary valuation
• Property valuation approach: How we’ll assess your property’s fair market value, including comparable sales and income potential
• Projected income potential: An estimate of the passive income you could earn from the fund’s diversified holdings
• Timeline expectations: Key milestones and estimated dates for completing each phase
• Due diligence requirements: Specific documents and information needed for our review
• Confidentiality provisions: Terms governing the exchange of sensitive information

This step allows both parties to align on fundamental terms before investing significant resources in due diligence. You’ll have the opportunity to review these documents with your advisors to ensure they meet your financial and tax objectives.

Our team conducts an in-depth review of your property to ensure it meets the fund’s rigorous standards. This step involves:

• Physical inspection: A detailed assessment of the property’s condition, including structural integrity, systems, and any deferred maintenance
• Title review: Verification of a clear title, free of liens, encumbrances, or legal disputes that could complicate the transfer
• Lease and income analysis: Evaluation of current leases, tenant creditworthiness, vacancy rates, and historical rental income
• Market analysis: A study of local market trends to confirm the property’s long-term value

This process typically takes 2–4 weeks and may involve third-party experts like appraisers or environmental consultants. You’ll receive updates throughout to keep you informed.

Following successful due diligence, we prepare a detailed Contribution Agreement that formalizes all aspects of the exchange. This binding legal document includes:

• Final property valuation: The agreed-upon value used to determine your ownership units
• Precise unit allocation: The exact number of fund units you will receive
• Representations and warranties: Your statements about the property’s condition and legal status
• Tax treatment provisions: Language confirming the transaction’s intended 721 exchange tax treatment
• Closing conditions: Any remaining requirements that must be satisfied before closing

Your legal counsel will review this agreement to ensure your interests are protected and all tax deferral requirements are properly addressed.

Concurrent with the Contribution Agreement, you’ll receive our offering documents, including the Private Placement Memorandum (PPM). This critical step provides full transparency into the fund you’re joining, covering:

• Fund structure: Details on the operating partnership, management team, and investment philosophy
• Income strategy: How the fund generates cash flow and distributes it to unit holders
• Risks: Potential challenges, such as market downturns, interest rate changes, or limited liquidity
• Liquidity options: Conditions under which you can redeem or sell your units

Our team will walk you through these materials—typically over 1–2 meetings—answering questions and ensuring you’re comfortable with the fund’s terms before your final commitment.

If everything aligns, you’ll contribute your property to the fund by deeding it in exchange for ownership units. This final step includes:

• Deed transfer: Legal documentation transferring your property’s title to the fund
• Unit issuance: Receipt of your ownership units, reflecting your proportional stake in the fund
• Tax deferral confirmation: Verification that the exchange meets IRS Section 721 requirements

Closing usually occurs within 1–2 weeks of signing the contribution agreement, marking your transition to passive, income-generating ownership without the burdens of direct property management.