Invest Cash or Real Estate Assets.
The SMI Fund Management’s Legacy Fund, is a unique real estate investment opportunity providing the four economic benefits of real estate ownership coupled with the tax-deferred, non-taxable contribution of real property, utilizing Section 721 of the Internal Revenue Code, in exchange for membership units in the Legacy Fund.
Investors may contribute cash and realize the benefits of real estate ownership. Through contributing real estate assets, investors have the opportunity to divest from the individual responsibility of management, tort-liability, and debt liability, all while preserving the investor’s depreciated tax basis, and pass-through tax treatment. Investors maintain direct participation in the four economic benefits offered through real estate investments, namely the receipt of spendable income, wealth accumulation through principal reduction and debt payoff, the tax benefits of depreciation expense, and the enjoyment of appreciation of the underlying assets.
Benefits of Real Estate Ownership through the Fund:
Retention of the Four Economic Benefits of Real Estate Ownership
The SMI Legacy Fund is a pass-through entity, in the form of a limited liability company (“LLC”). Investors maintain direct participation in the four economic benefits offered through real estate investments. Investors own membership interests in the SMI Legacy Fund, LLC (the “Fund”), and therefore participate on a pro-rata portion of the four economic benefits offered by each real estate asset the fund owns. To summarize these four benefits:
- Spendable Income (i.e. Cashflow). The Fund invests almost exclusively in income producing real estate assets. Net rental income, that amount leftover after paying operating expenses and debt services, and after allowing for sufficient operating reserves, is distributed to investors of the Fund on a quarterly basis.
- Principal Reduction. The Fund utilized a modest amount of leverage, typically around 50% to 60% LTV, to improve overall yield for its investors. Assets are scheduled to positively cashflow while amortizing debt on a 20–30 year schedule, providing the opportunity for long term wealth accumulation through principal reduction and debt payoff.
- Tax Shelter. Investors benefit from additional depreciation as the Fund makes new acquisitions and exchanges into larger assets. Additionally, the Fund utilizes cost-segregation, when appropriate, to accelerate depreciation losses for its investors.
- Appreciation. Investors benefit from organic appreciation of the diversified portfolio. Additionally, the Fund targets value-add investment opportunities in multiple real estate assets classes to accelerate appreciation opportunities and overall return on investment.
Investors own membership interests in the Fund, organized as an LLC, alleviating the investor of tort and debt liability through direct ownership of real property. Additionally, the Fund’s operating agreement prohibits an investor from being required to ever make an additional contribution or “capital call.”
Investors maintain their existing individual depreciation schedule. Investors may gain additional depreciation on a pro-rata basis as the Fund makes acquisitions and grows its portfolio. Additionally, the Fund often utilizes cost-segregation to accelerate and increase its depreciation benefit to its investors.
Investors receive quarterly distributions of all spendable income earned by the Fund.
Investors own membership units in the Fund and a corresponding pro-rata interest of the diversified real estate holdings of the Fund, all while preserving their passive pass-through tax treatment.
721 Exchange Benefits
In addition to the foregoing advantages of investing into the Fund, there are other potential benefits described in our 721 Exchange page.
Enjoy your time and income without the hassles of property management, negotiating with lenders, or vendors. No building improvements to oversee, no rent increases to post, no tenant conflicts to manage, and no rules and regulations to track. The Fund is focused on providing consistent, increasing passive income to its investors.
The SMI Fund Management team takes care of all facets of property and asset management. The Funds real estate portfolio is taken care of properly so as to maximize potential upside through proper maintenance, increased rents, and efficiencies of scale. The SMI 721 Exchange diversifies your risk by balancing its portfolio with various asset classes in varying locations. The Fund utilizes debt at more modest levels to preserve a higher ratio of cashflow to interest expense (debt service coverage ratio), and providing greater risk mitigation during times of volatility.