Every real estate investor seeks the best possible tools and products to up-level their portfolio. A Delaware Statutory Trust (DST) gives investors a way to build wealth, with fewer hands touching every part of the investment. Yes, fewer responsibilities and limitations. A DST gives investors better buying power on properties that would be harder or near impossible to purchase on their own. When you work with an accredited DST representative, they handle the daily management of the investment.
This type of opportunity gives all owners a stake in how the deal works or functions. The management team then judicially learns everything about the property and monitors its validity, futures, and revenue. These properties range from residential to commercial options and are often owned by large holders or conglomerates needing to earn passive income. This allows these larger entities a way to minimize the complexities of management/ownership.
The IRS recognizes DSTs as replacement property for 1031 exchange purposes. Basically, the IRS views your DST as a direct investment that satisfies the IRS rule 2004-86 requirements for an ownership interest. The 1030 exchange is a stable tax recognizable option and goes back to the 1920s. While DSTs are a great option for seasoned investors in this space, they are also beneficial for those who are not in the exchange. A non-exchange investor will diversify their investments and get access to institutional-grade real estate platforms. These individuals use cash (instead of the 1031 exchange) to take part in the investment.
When you build a DST, you’re not taxed, so all profits and losses are experienced and handled through the investors. There are various advantages of acquiring a DST investment, and we are going to discuss a few of those below.
RETURNS AND CASH FLOWS
Investors seeking potentially better returns and cash flow can do so by understanding where they are starting. You find this by starting at your Schedule E tax forms. Look for the net rental income. You’ll take the number and add depreciation in and subtract the principal payment portion. That will give you a number that you’ll divide by the property market value. A DST will often give the investor a passive alternative so their cash flow can help them reinvest elsewhere.
TAX BENEFITS FOR PLANNING AND PRESERVATION
Like any real estate investment, a DST is treated the same in your tax structures. Your shares are like any other property you might own. Again, the trust isn’t taxable but will be considered in your planning and preservation of your profits. According to financial data, DSTs have a shelf life of 5-7 years. This allows you to plan for new DSTs or prepare your departure from the exchange. This differs greatly from traditional real estate investments dictated by market conditions and other interest-bearing structures.
The power of DSTs is that they are owned by a management structure that can negotiate other assets on your behalf. While many real estate investments keep you focused on one deal, the exchange will manage multiple property options. Buy one apartment complex and allow the DST to work a deal to swap that for a strip mall for a higher return.
FREEDOM FROM PROPERTY MANAGEMENT
Management of multiple properties is complex, time-consuming, and requires constant attention to various systems. Burdened owners seek a way to minimize this daily life investment, making the DST a desirable option. This can change the game for many investors, who may be at a time in their life where they would rather travel or pursue personal (instead of business) endeavors.
Since management firms of DSTs are always looking for the best opportunities for their clients, they can expose you to new investments. They are also in a prime position to capitalize on market conditions. Many leverage what they have gained in the DST investments and place that in other options found by their management team.
RETIREMENT AND ESTATE PLANNING
Your family may not have the experience in real estate investment like you. This can be a source of anxiety for a family and leave your investments vulnerable. DSTs offer a new layer of protection for those trying to plan for their estate. This exchange option allows for wealth transfer, cash flow management, lower liability, and plenty of freedom. Your DST management team will work alongside your financial advisors to ensure your investments are handled properly for you.
Is it your time to seriously consider a Delaware Statutory Trust? Those who move into this type of investing talk about less workload in investment management and consolidation of earned profits. Investors choose the fractional approach because they have less interest in the day-to-day dealing in management. They are open to larger opportunities where their money works for them instead of the other way around. Talk to a DST 1030 Exchange professional today and find out if it’s an appropriate fit for your future investing.