So you want to buy a Starbucks? Not a cup of coffee, the whole building?

July 30, 2015 by Eric Linden
hot cup of coffee

Starbucks? Coffee beans? Lattes? What do they have to do with taxes? Don’t worry, we will get to that! But first, let’s discuss your Golden Years again, shall we? How you plan to fund that trip to Australia? Gifts for grandkids. Golf cart. Healthcare. That LARK scooter you have wanted since you saw the 2 AM infomercial. There are plenty of investment options out there. Namely, securities, bonds, annuities, and the like. Here is another option: A Single Tenant Double Net Lease Starbucks Building. In other words, real estate. But a different kind of real estate. Commercial real estate, but you will not be running the business. That coffee behemoth, Starbucks, does that just fine. You will own the building and the land. They make the frappuccinos and the half-caf skinny double lattes. You collect a check each month, they sell the doughnuts and scones.

Our generation is watching pensions slip into the night, and we will need some passive income from somewhere. Real estate can be a solid solution. Another option is to write a hit song like “Mary Had A Little Lamb” and collect a royalty check for a lifetime! I do not mean to dash anyone’s dreams of pop music stardom, but real estate may be a more practical solution. However, do not stop writing those lyrics in your garage late at night.

Back to this Starbucks investment. I once had a client, in my former career, who sold a few homes in a wealthy area of CA. (Now we get to taxes!) He did a Section 1031 tax exchange for a Starbucks near a major university in Ohio. A 1031 or like-kind exchange is a tax deferment strategy executed in a business or investment property (often real estate) transaction. The seller of real estate can take the proceeds of their sale and in a set time period roll these proceeds over into another piece of like-kind real estate property tax free (AKA tax deferred). This is a very popular tax strategy that many real estate investors utilize. They can be tricky and there are a number of rules, including the requirement that a “Qualified Intermediary” is engaged to execute the exchange. We do advise you to speak with your trusted financial advisor before making any decisions regarding a 1031 exchange, of course.

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