BENEFITS OF DST INVESTING - The Internal Revenue Service issued Revenue Ruling 2004-86 that sets out the guidelines for the Delaware Statutory Trust (DST). This revenue ruling created a safe harbor for DSTs as “like kind” for purposes of a 1031 exchange. Investors in DST properties enjoy all the tax advantages of owning traditional real estate with less work and less liability.
There are many additional benefits of DST ownership that are unavailable with traditional property ownership
Freedom From ManagementResponsibilities
Our DSTs are managed by professional, third-party firms. For investors transitioning from actively managing properties to passive ownership, our ownership structure alleviates the burden of day-to-day management and replaces it with the freedom of time for travel and leisure. Ownership distributions from cash flow are paidmonthly, assuming funds are available. Investors receive monthly operating reports and a year-end tax package directly from the management firm.
No Personal Liability
The debt financing for each property is nonrecourse to the DST investors. The Sponsor is the guarantor of all recourse obligations under the loan agreement. DST investors have no liability to their personal assets due to the bankruptcy-remote provisions of the DST. These provisions provide that any potential creditors of the Trust, including the lender, are prohibited from reaching any of the DST investors’ individual or other assets.Additionally, because an LLC is not required to hold the DST interests, investors do not have to incur annual state filings and the fees associated therewith.
Ease of Financing (Debt Replacementin a 1031 Exchange)
The first mortgage for the DST property is obtained by the Sponsor and is recorded on the property prior to the investors taking ownership of the DST. DST investors are allocated their portion of the debt based on their pro rata share of ownership interests. The DST eliminates the need for investors to obtain individual financing on their own, as the DST is the sole borrower. Many DST investors appreciate having “in-place” financing that is set and secured with established fixed rates and terms.
Low Minimums
Because a DST Private Placement Offering is allowed by the IRS to have up to 499 investors, the minimum investment amounts are typically much lower than if an investor were to individually purchase a solely-owned property. Most of our DST investments have a minimum equity investment requirement of just $100,000, which makes it easy for DST investors to diversify their portfolio.
Higher-Value Properties
A DST is a “pooled-equity” investment that allows investors to collectively purchase a property of higher value by aggregating their equity together. More combined equity means more buying power, and with that comes the opportunity to purchase properties that might otherwise be out of a single investor’s reach. These higher-valued properties may also be more attractive and better suited to an investor’s individual preferences.
Diversification Strategy
Financial advisors utilize diversification as a strategy to reduce investment risk. DST investing can provide the same opportunity to real estate investors due to the low minimum investment requirements. This allows investors to easily make multiple, smaller investments rather than purchasing a single, solely owned property. It can be a daunting task for individual investors to make multiple property purchases on their own while meeting all the timing requirements under Section 1031 of the Internal Revenue Code.
Visit our 1031 Exchange Resources Page & contact Ted to receive a free copy of the Guide to DST 1031 Exchanges & a direct referral to a few of the top Delaware Statutory Trust Investment Firms - 925-322-1474
Visit our 1031 Exchange Resources Page & contact Ted to receive a free copy of the Guide to DST 1031 Exchanges & a direct referral to a few of the top Delaware Statutory Trust Investment Firms - 925-322-1474