LEARN

Contribute cash or rental real estate, on a tax-deferred basis, using SMI’s 721 exchange program.

Watch this introductory video and get to know the professionals who operate the Fund.

Easier than Owning,
Better than Selling

Keep the benefits of owning rental properties and pass the responsibilities to SMI Legacy Fund. No more day-to-day property management or accounting. You receive the benefits of a more diverse portfolio, managed by real estate professionals, while still deferring capital gains taxes.

Turn Your Portfolio
into Passive Income

Owning multiple rental properties can be a full-time job. By contributing your properties into the Fund by using our 721 Exchange Program, you can spend your days on other pursuits, vacations, or hobbies. The Fund’s professionals have the expertise and economics of scale to bring in your properties, add value, and provide you with true passive income.

How it Works

The Fund’s 721 Exchange Program uses Section 721 of the Internal Revenue Code. Section 721 allows investors to exchange their Real Estate properties, tax-free, for direct ownership in the Fund. This tax strategy has been utilized by investors since the 1950s. Our management team has a vast amount of expertise and experience utilizing this tax advantaged exchange.

STEP 1

Get a valuation & discuss your needs

Our team will facilitate obtaining a 3rd party MAI Appraisal to determine the value of your real estate. This value is subject to your approval.

Once you receive your appraisal, our experienced advisors can configure the investment into the Fund.

STEP 2

Perform due diligence & sign
the Contribution Agreement

The Fund will share with you the pertinent Investment Documents, including the Fund’s Operating Agreement, Subscription Agreement, Private Placement Memorandum, Contribution Agreement and other Investor Onboarding Documents, for you to review with your legal and tax professionals.

STEP 3

Complete your investment

The Fund will assist you through each step of the closing process. When the investor is ready, the Investment Documents, including transfer deed, will be executed and recorded through escrow, to complete your investment into the Fund.

Once the above is completed, you will be an investor in the SMI Legacy Fund, receiving quarterly distributions and building equity with our partnership.

Frequently Asked Questions (FAQs)

What is the process of investing in the SMI Legacy Fund?

Process of Investing in the SMI Legacy Fund:

Investor provides pertinent Investor and Property Information on the Get Started page

SMI Legacy Fund reviews and issues Non-Binding Letter of Intent

Your property is appraised by a third-party MAI appraiser

Investor reviews and accepts appraised value
SMI Fund Management reviews and accepts appraised value

Investor completes due diligence on SMI Legacy Fund

Review the Fund’s Investment Documents and other Investor onboarding documents

Fund completes due diligence on your property

Finalizing the Investment

Execute Investment Documents
Execute Transfer Deed with Title

Start participating in the 4 economic benefits of real estate investing

Receive quarterly distributions
Participate in principal paydown
Receive depreciation losses
Participate in long term appreciation of the Fund

Once I contribute my property to the Fund through the 721 Exchange, will the Fund continue to own and operate my asset on behalf of the Funds investors?

Yes, the Fund will own and operate the contributed asset. The Fund’s manager has a lot of experience in maximizing the value of real estate holdings, and more importantly repositioning assets over a period of time to increase the economic benefits offered through spendable income, principal reduction, tax shelter, and appreciation potential. When the Sponsor believes the equity in this asset is best served on the next acquisition, the Fund may elect to sell the asset and complete a 1031 exchange in order to increase the profits realized by the fund’s investors.

How does the Fund mitigate risk?

The Sponsors of the Fund have targeted a demographic of investors in which preservation of wealth is as important and more important than wealth accumulation. There is an intrinsic relationship between risk and reward, and all risk can never be alleviated. However, the Fund has been designed to substantially mitigate risk in several ways. First and foremost, the Fund invests primarily in income producing real estate, including apartments, self-storage, office, and retail. The Fund is not focused on real estate development, options, distressed notes, and other asset classes that are more exclusively growth focused and often lack spendable income (cashflow). Additionally, the Fund utilizes a more modest amount of total debt, with a global debt service ratio of no less than 150%. This means for every $100,000 in debt payments the fund obligates itself to, the Fund must maintain $150,000 in Net Operating Income. This is substantially higher than that which is required under prevailing lender underwriting guidelines. An increased Debt Service Coverage Ratio reduces volatility in distributable income, allowing the fund to more consistently distribute income to its investors. It also provides a greater hedge against other forms of volatility in the marketplace and debt environments.

Can my accounting, legal, and investment professionals discuss my investment with the Fund’s management?

What fees does the Fund and its manager charge?

The Fund and its manager charge an administration fee equal to 3% of gross collected rents, similar to a typical arrangement with a professional property management company. The Fund’s manager shares in a portion of the profits realized by the Fund over the duration of its operations. Investors are first entitled to receive 100% of profits realized through their equity ownership in the Fund until an 8% annual preferred return is achieved, often referred to as a “hurdle rate.” Once the hurdle rate is met, additional profits are split 70/30 in favor of the investor. For example, if an investor invested $100,000 in the fund, they would be entitled to 100% of the profits until they are earning $8,000 annually. Additional profits will be split 70% to the investor and 30% to the Fund’s manager. The Fund’s manager does not charge fees for specific events such as acquiring a property, refinancing an asset, or overseeing the substantial renovation of a property, as is often customary in a real estate syndication or fund offering. The fees have been designed so that the Fund’s manager participates exclusively in the long-term profits realized on behalf of its investors through its active and efficient management of the portfolio.

Can I “cash-out” a portion of my equity and complete a 721 Exchange for the rest?

Yes. Similar to completing a partial 1031 exchange, an investor may elect to complete a partial 721 Exchange to the Fund, and sell the remaining portion of the asset to the Fund. The portion that is sold to the Fund traditionally will not be tax-deferred, and the investor may realize a taxable event. It is very common that an investor elects to complete a partial 721 Exchange so that they may convert a portion of their equity to cash and defer the tax-basis of that portion they wish to contribute and invest into the Fund.

Does the Fund accept contributions from investors or invest in properties outside of Oregon?

The Fund will accept contributions of cash from investors outside of Oregon and may accept contributions of real estate outside of Oregon on a case-by-case basis. For investments, at this time the Fund is exclusively focused on Oregon and SW Washington. The Fund has the authority to expand its geographic territory. However, the Fund’s managers think it is most prudent to invest in areas that they are most intimate with, allowing for the highest degree of accuracy in properly accessing acquisitions and the most efficiency in overseeing the day to day operations that are involved in maximizing the profitability of real estate assets.

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Learn How Easy It Is To Contribute Your Asset To The SMI Legacy Fund!

Invest Cash or Real Estate Assets.

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