1031 DSTs at a Glance
Welcome to the intriguing world of 1031 DSTs (Delaware Statutory Trusts), a powerful investment strategy that has the potential to transform the way you think about real estate investing.
First and foremost, let's talk about the tax benefits. The 1031 DST operates under Section 1031 of the Internal Revenue Code, which allows you to defer capital gains taxes when you sell a property and reinvest the proceeds into another "like-kind" property. This means you can potentially maximize your investment returns by deferring the tax burden and allowing your money to work for you in the meantime.
But here's where the DST truly shines: It allows you to invest in institutional-grade, income-producing properties without the hands-on management responsibilities that typically come with real estate ownership. Think about the peace of mind that comes from knowing you're investing in professionally managed properties such as apartment complexes, commercial buildings, or even healthcare facilities, all while leaving the day-to-day management to experts in the field.
Another key advantage of 1031 DSTs is diversification. By pooling your investment with other like-minded investors, you can gain access to a portfolio of properties that would be difficult to achieve on your own. This diversification can help mitigate risk and smooth out the volatility that can sometimes be associated with individual property ownership.
Furthermore, the DST structure offers flexibility. You don't need to find a replacement property yourself immediately after selling your current property. Instead, you can invest in a DST and become a fractional owner of multiple properties with potentially steady income streams. This flexibility also opens the door to investing in locations and markets that might have been out of reach otherwise.
1031 DSTs present an incredible opportunity: the chance to defer capital gains taxes, invest in professionally managed, diversified properties, and enjoy the benefits of passive income without the hassle of active management. It's a way to amplify your real estate investment strategy, potentially increasing your returns while reducing the time commitment and complexities associated with traditional property ownership.
However, it's important to note that like any investment, 1031 DSTs carry risks and require careful consideration. Consulting with financial and tax professionals is crucial to ensure that this investment aligns with your overall financial goals and circumstances.
Key Benefits of 1031 DSTs Exchanges
NO MANAGEMENT RESPONSIBILITIES
The DST is the single owner and agile decision maker on behalf of investors.
ACCESS TO INSTITUTIONAL-QUALITY PROPERTY
Most real estate investors can’t afford to own multi-million dollar properties. DSTs allow investors to acquire partial ownership in properties that otherwise would be out-of-reach.
LIMITED PERSONAL LIABILITY
Loans are nonrecourse to the investor. The DST is the sole borrower.
LOWER MINIMUM INVESTMENTS
DSTs can accommodate much lower minimum investments, whereas 1031 exchange minimums often are $100,000.
DIVERSIFICATION
Investors can divide their investment among multiple DSTs, which may provide for a more diversified real estate portfolio across geography and property types.
ESTATE PLANNING
All 1031 exchange investments receive a step-up in cost basis so your heirs will not inherit capital gain liabilities, and provides them with professional real estate management versus the burden of hands-on management.
INSURANCE POLICY
If for some reason the investor can’t acquire the original property they identified, a secondary DST option allows them to meet the exchange deadlines and defer the capital gains tax.
ELIMINATE BOOT
Any remaining profit on the sale of your relinquished property is considered “boot.” This remaining money becomes taxable unless you eliminate it. The excess cash (boot) can be invested in a DST to avoid incurring tax.
SWAP UNTIL YOU DROP
The DST structure allows the investor to continue to exchange real properties over and over again until the investor’s death.
Disclaimer: This material is neither an offer to sell nor a solicitation of an offer to buy any security which can be made only by a prospectus, or offering memorandum, which has been filed or registered with appropriate state and federal regulatory agencies, and sold only by broker dealers and registered investment advisors authorized to do so.