My question is regarding how cash flow would be affected due to financing on a current property before exchange. The situation is that there is a property owned that is worth $1.5 million. The outstanding loan is for $300,000. I am to understand that once a 1031 exchange is complete, the TIC to be purchased has a loan that is non-recourse. I also understand that more or equal debt must be taken on in the TIC than $300,000 for the optimum exchange benefits. My question is this: once someone purchases the property, the outstanding loan is repaid, and exchange complete, is the cash flow on the TIC to be paid on $1.2 million or $1.5 million investment? Please assist.

The sales price is $1.5 million and the debt amount is $300,000.00.  The net equity at the close (ignoring closing costs) would be $1.2 million.  The "equity raise" or "equity investment" would be $1.2 million, but the actual amount owned in the property would be $1.5 million.  The majority of Private Placement Memorandums quote yield as a percent of cash investment or equity, so the return will be based or quoted on the $1.2 million in equity, but you will own $1.5 million in real property.  Does that make sense?