A Delaware Statutory Trust (DST) is a private trust that owns, manages, and sells investment properties. DSTs have an attractive portfolio that includes large investment properties. It is a shared ownership structure, and upon investing in a DST, you co-own one of its properties along with other investors. Large structure and lower investment are what make DSTs one of its kind. A DST consists of up to a hundred investors or even more, and you can start a 1031 DST investment at just $100K. DSTs come handy, particularly when you cannot find a 1031 property for your 1031 exchange. As you may know, the IRS gives you 45 days to identify replacement property in a 1031 exchange. However, sometimes it gets difficult to locate an ideal property. That’s when DSTs can help as they qualify for 1031 exchanges.
How DST Functions?
A real estate firm, also known as a sponsor, acquires properties under the DST umbrella and then opens it up for investors to buy shares in those properties. Any investor can buy shares in a DST with the help of a real estate broker or agent. DSTs generally have a large structure, and a single DST may have a hundred or even more investors. DST’s large structure enables small investors to own large institutional-grade properties with minimum investment.
Major benefits of DST 1031 investments –
- Relief from property management – DST properties come with pre-arranged property managers, which means you don’t need to look after your investment property.
- Diversification – DSTs give investors an opportunity to diversify their investment portfolio. As a DST investor, you can split your proceeds and invest them in different properties or assets.
- Low Investment – As mentioned earlier, because of DSTs’ large structure, a DST investment may start from as low as 100K, which is significantly less as compared to other individual investments.
- Numerous tax advantages – Along with the opportunity to defer capital gains tax using a 1031 exchange, you may also benefit from depreciation and other deductions, which shelter a portion of their investment income from taxes.
- Gain non-recourse debt – Almost every accredited investor looks for institutional-grade, pre-arranged, and non-recourse financing with easy approvals. DST investors can invest in properties ranging from all-cash debt-free acquisitions to properties with up to 85% leverage.
In addition to these benefits, DST investors also enjoy increased cash flow, an opportunity to 1031 exchange in and exchange out their proceeds, etc.