| Tenants In CommonDelaware Statutory Trust1031 Exchange |
Investment real estate with flexibility and potential for asset protection.
A Delaware Statutory Trust, also known as a DST, is an unincorporated association governed by a trust agreement. The DST has a separate legal existence and can conduct business in its own name, including the purchase of investment real estate. DSTs offer a unique combination of flexibility and asset protection.
DST investments generally share these features:
- Title of the property is held in the name of a trust, with co-owners holding beneficial interests in the trust that equate to their percentage ownership of the property.
- There can be up to 99 co-owners on each investment, with co-owners sharing pro rata on income, appreciation, and tax benefits.
- The minimum investment required depends on the price of the property, the number of co-owners, and other factors.
- The term of the loans generally range from 5-12 years.
- Minimum investments normally start at $100K, though some properties can accommodate lower investment amounts.
- Your investment can be bought, sold, gifted, willed, or inherited.
- Your investment is subject to property, gift, estate, and other taxes.
DST investments can offer these benefits:
- Institutional-grade real estate.
- Monthly cash flow, sheltered through depreciation, and property appreciation.
- Potentially substantial tax benefits, including deductible interest.
- Freedom from active property management responsibility.
- Valuable diversification for your overall investment portfolio.
- Real estate diversification by property type and geographic location.
- Extensive due diligence conducted by the real estate provider, the lender, and the securities industry.
- Opportunities available only to qualified investors.
- If you're contemplating or involved in a 1031 exchange, DST investments may be especially suited to your situation. These properties can be identified and closed in a timely manner due to pre-arranged financing and coinciding escrow terms.
Like any real estate investment, DST investments present certain risks:
- They may potentially lose value during the life of the investment.
- The investment may impact your income bracket and/or tax status.
- While there is the potential for foreclosure with any real estate investment, the multiple layers of due diligence help minimize the risk.
- Real estate can be a relatively illiquid asset.
- If a DST property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions.
- Costs associated with the transaction may impact returns, and may outweigh the tax benefits of the real estate.
- DST co-owners do not have direct say over day-to-day property management situations.
A simplified structure reduces formation costs and annual fees, and may potentially create more favorable loan conditions.