A Delaware Statutory Trust, abbreviated as DST, is a distinct legal entity established as goodwill under Delaware Statutory Law. A DST involves investing in one or more properties alongside other shareholders. Even though DSTs are not new, recent tax legislation has increased their popularity amongst 1031 exchange investors.
Investing in a Delaware Statutory Trust is viewed as if it were an actual real estate investment. Usually, the minimum investments range from $25,000 to $100,000. As a result, an individual investor might possess a proportional share in an entire property or portfolio and profit from the trust’s operations, rent, and ultimate asset resale. So, why should you think about a DST exchange?
You Do Not Devote Your Time to Property Management
Managing a property is not easy. Those who own or have actually owned one may testify this. Investors who would like to experience relief or avoid responsibilities prefer to handle management and decision-making responsibilities to a specialized group of professional managers. This way, they have more time to accomplish other stuff or invest in other sectors.
You Can Readily Obtain Investment-Grade and High-Value Properties
Because of the high cost, many real estate developers cannot invest their money in multi-million-dollar properties out of their own. Delaware Statutory Trusts provide such a possibility. Investors purchase a portion of such properties and enjoy the profits.
This must have helped you get some insight into why you might choose a DST 1031 exchange.
Diversification Possibilities as Well as Regular Payouts
You can split your investment among many DST properties since you can choose a specific resource to invest in a Delaware Statutory Trust. As a result of this, you will be able to broaden your real estate empire.
Besides that, DSTs are entitled to hold a certain amount of funds available. Such money is placed aside to handle unforeseen expenses like property renovations. All revenues and benefits beyond the reserved amount, on the other hand, must be given to the members frequently and within the specified timescale. Now you understand why you’ll get a decent return on your investment?
Investors Do Not Have to be Eligible for a Loan
This is another advantage to consider a DST 1031 Exchange. Investors are not required to meet the property’s mortgage financing requirements. The only organization eligible for the mortgage loan is the Delaware Statutory Trust, which is advantageous to the shareholder.
Investors do not need to present any credentials to be approved for a loan. More to that, they do not need to be concerned about other belongings or responsibilities impacting the loan’s status.
No Need to Worry About Exchange Deadlines
Since a DST investment can shut quickly, investors do not have to be concerned about the acquisition deal not closing on time or not purchasing a desired property competition in the industry.
1031 Exchange Backup Plan
During the identification stage, 1031 exchange investors might include a DST property amongst their three candidate assets. Suppose they cannot obtain their initial two choices of identified candidate properties in time to meet their deadlines. In that case, the DST property stays as an alternative that can be closed fast in order to make the exchange timeline.
Eliminate Boot
Investors in 1031 exchanges dislike paying taxes on capital gains on boot since their substitute property is less expensive than their abandoned property. Because DST shares are less costly than most desirable investment properties, the residual worth, or boot, can be utilized to purchase a portion of a DST property as a second replacement property in a 1031 exchange.
Invest The Amount That You Desire
Investors in real estate frequently overstretch themselves monetarily in order to obtain a good investment property.
With a DST, you can spend the money that is suitable for you and buy the proportion of the property that you can manage. It’s worth noting that DSTs have a minimum investment requirement, which is typical $100,000 for 1031 exchange participants.
Conclusion
There are numerous reasons to think about a DST 1031 EXCHANGE. A few of them have been discussed in this article.
