Investment real estate, including securitized real estate, comes with substantial risks, including but not limited to; the absence of guaranteed income; lack of liquidity; the risks of owning, managing, operating and leasing properties; possible conflicts of interest with managers and affiliated persons or entities; the risks associated with leverage; tax risks, including possible changes in tax law; declining markets and challenging economic conditions; ongoing fees; and known or unknown regulatory challenges. Finally, it should be understood that the ultimate risk of investing in real estate could include the total loss of principal investment.
Some real estate and real estate securities may involve leverage which adds risk of default and potential foreclosure if a property or properties cannot meet its debt service requirements. Leverage can amplify potential returns as well as potential losses. If an investor elects to complete a 1031 exchange, they may be subject to potential tax risks if their transaction does not comply with section 1031 requirements. Real estate valuation and cash flow is impacted by interest rate risks; economic risks; risks of terrorism; environmental risks; liability risks; zoning, city ordinance, and or legal compliance risks; title and escrow risks; flood risks; fire risks; credit risks; market risks; risks of obsolescence; and acts of God.
There are risks involved with completing a 1031 Exchange. One should consult their legal or tax advisor prior to engaging in a 1031 Exchange. Real estate investments are illiquid and highly speculative.