Each type of investment include risks, which include, but are not are not limited to the following:
Alternative investment products, including real estate investments, notes and debentures, hedge funds, and private equity are considered highly speculative and involve a high degree of risk. They often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager.
Alternative investment performance can be volatile. Investors could lose all or a substantial amount of their investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor’s interest in alternative investments, and none is expected to develop. There may be restrictions on transferring interests in any alternative investment. Securities offered through Concorde Investment Services are not FDIC insured and may lose value.
Be sure to consult with your Fortitude Investments representative as to which of these risks mentioned above are present in the offering you are interested in.
Risks of Investment Real Estate
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; on-going 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.
Risks of a 1031 Exchange
If the strict timeline and procedural rules are not followed, the 1031 Exchange may be disqualified from any tax advantages. Also, there is no guarantee that the IRS will approve each individual exchange, nor that tax law will not be altered in the future, nor that the IRS will not change their application of present law to future cases. Finally, the full scope of tax related risks can only be determined in counsel with your personal tax advisor, taking into account all the details of your tax situation and the specific laws of the state in which you reside.
Risks of Delaware Statutory Trusts
The risks of investing in a DST include but are not limited to: the risk of relying upon the program sponsor and their continued competency and success; the risk of sponsor insolvency; and the risks associated with giving complete discretion regarding the management, leasing or disposition of the property to a third party. If the property held by the DST is leveraged, there is the risk of being unable to re-finance the program at the end of the term of said loan. Also, there is the risk of possible conflicts of interest with program sponsors, trustees, or property managers.
In addition, there are tax-related risks when using a DST ownership structure for the purpose of a 1031 Exchange. While the DST offerings through Fortitude are designed for this purpose and are accompanied by a “should” level legal opinion that they are suitable for 1031 Exchange, there is no guarantee that the IRS will approve each individual DST structure or each individual exchange.
Risks of Tenancy in Common
In addition to all the risks of investment real estate, owning real estate in common entails the risk of disagreement or conflict with the other tenants as to the management, financing or sale of the property. Unanimity among the tenants is required for all major decisions, and though there are usually provisions allowing the purchase of the interest of a dissenting tenant, this could prove difficult or time consuming. If the property held in common is leveraged, there is the risk of being unable to re-finance the program at the end of the term of said loan. Also, there is the risk of possible conflicts of interest with program sponsors, trustees, or property managers.