Buying Advice

In the Market for an Exchange? Consider a Delaware Statutory Trust

Have you ever regretted not listening to your own advice? Lately, I’ve been questioning my decision to buy another property via a 1031 Exchange. Don’t get me wrong. I think 1031 Exchanges are a great way to grow equity, defer taxes, and create wealth. But, when you reach a certain age, the headaches that come with owning property can be, well, extra — extra work, extra money, extra time. Recently, I’ve been dealing with water intrusion, old pipe replacement, insurance companies, property managers, loss of rents, homeowner’s associations, and a whole lot of extra. Sigh…

Hmmm…..maybe I should have exchanged my property into a Delaware Statutory Trust?

If you are like me and at an age where you want to simplify your real estate portfolio, you may want to consider a DST.

What is a Delaware Statutory Trust?

They are ideal for investors seeking to defer their capital gains taxes through the use of a 1031 tax-deferred exchange. The DST structure allows a smaller investor to own a fractional interest in large, professionally managed property. Each investor is an individual owner within a Trust. Each owner receives their percentage share of the cash flow income, tax benefits, and appreciation. DSTs provide the investor with the potential for annual appreciation and depreciation. They provide tax shelter, just like real estate.

Most have minimum investments as low as $100,000. This allows investors the benefit of diversification into several properties. A DST may also be the perfect vehicle for investing any equity you have remaining after a traditional 1031. Exchange a higher-priced property for a lower-priced property and invest the remaining equity into a DST.

Investment Without Management Responsibility

The cool thing about DSTs is that an investor gets the benefit of real estate investment without the management responsibility. Sounds good, doesn’t it? You can let professional investment asset managers do the management, while you enjoy the benefits.

DSTs aren’t for everyone, but if you want a little less headache, and a lot more freedom, you’d be wise to check them out. Oh, and be sure to check with a qualified tax advisor while you’re at it!

And, next time, I’ll listen to my own advice…

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J. Dickinso

May 24, 2024

That was a great article, Cherie – Where do a find a legitimate, trustworthy DST investment? There are a lot of firms that say they can offer lists, but that’s so risky. As a Hawaii property owner, I am looking for a company that is either in the islands or west-coast based. I wish Hawaii Life offered this product! Thanks.

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