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A Delaware Statutory Trust or DST can be an effective 1031 replacement property solution to build long-term wealth. As with any real estate investment, there are risks in investing in DSTs. However properly underwritten and diversified DSTs can offer several advantages over directly owned and managed properties.
Many investors decide that DSTs are an ideal alternative to actively investing and being a landlord with the day-to-day headaches. Although this investment vehicle has many advantages, we’re going to provide a broad overview of the top three reasons we like DSTs.
Many investors are attracted to the passive investment strategy, the biggest advantage of a DST. Instead of cashing out of a property and incurring capital gains, investors may opt to use the DST structure to satisfy 1031 tax deferral requirements and start a monthly income distribution. A combination of these two benefits of the tax code can be a powerful wealth-generating tool for the passive investor.
The second advantage many investors find appealing in a Delaware Statutory Trust is access to higher-quality properties in a commercial real estate portfolio. With as low as $100,000 invested, DST vehicles can allow an investor to allocate their 1031 exchange proceeds into a DST offering. This allows investors to build customized DST portfolios that generate monthly cash flow through passive ownership and regular distributions.
The third advantage to a real estate investor is removing the time-imposed factor of a 1031 exchange. DSTs are a pre-structured, income property solution, and available for immediate closing. Meeting the imposed timing restrictions the IRS has on 1031 exchanges can be challenging, so many investors opt for a pre-packaged DST. This still provides the passive income solutions without the stress of competing in a hot real estate market to meet the IRS-imposed timeline of 45 days to find a replacement property.
A DST may be the right investment strategy for you if you are looking to build generational wealth while earning a passive income stream. Schedule a time to speak with one of our team members if you’d like to learn more. Commercial properties can often be structured to utilize the benefits of a DST.