A 1031 exchange is a powerful tool for investors who are looking to defer capital gains tax on their property sales by exchanging it with a like-kind property. However, choosing the right vehicle for 1031 exchanges can be a challenge. One option that has gained immense popularity among investors in recent years is the Delaware Statutory Trust (DST). In this blog post, we will discuss why more and more investors are turning to DSTs for their 1031 exchanges with 1031 advisor.
Diversification
DSTs are a great tool to diversify your real estate portfolio. When you invest in a DST, you own a fractional interest in a larger property that is managed by a professional asset manager. This allows you to access different types of properties in different geographic regions that may otherwise be out of reach. Additionally, with a DST, you can invest in institutional-grade assets such as multifamily, industrial, and commercial properties, which are generally not accessible to individual investors.
Passive Investment
DSTs are a passive investment, which means you do not have to worry about the day-to-day management of the property. A professional asset manager manages the property, handles all tenant and operational issues, and distributes the income to you. This passive investment structure appeals to investors who do not wish to deal with the headaches of property management.
Minimal Investment Requirement
DSTs also have a low minimum investment requirement. With a DST, you can invest in a property for as little as $100,000. This allows investors to diversify their portfolio without committing a significant amount of capital to a single asset. Also, with DSTs, you can invest in multiple properties thereby further diversifying your portfolio.
Tax Advantages
DSTs are structured to offer tax advantages to the investor. In a 1031 exchange, when you sell a property, you need to reinvest the proceeds in a like-kind property to defer the capital gains tax. DSTs are structured to qualify as like-kind properties, which make them an ideal investment vehicle for 1031 exchanges. Also, while you continue to defer tax, you can receive a steady stream of income through distributions from the DST.
Reduced Liability
When you invest in a DST, you are not liable for the loan or any other debts on the property. Additionally, you are not responsible for any decisions related to the property as it is managed by an experienced asset manager. This significantly reduces your liability and risk.
Conclusion:
Investing in a Delaware Statutory Trust (DST) offers a number of benefits for investors who are looking to diversify their real estate portfolio and take advantage of 1031 exchanges. With DSTs, you can access different types of properties in different geographic regions, invest passively without managing the property, invest with a low minimum investment requirement, enjoy tax advantages, and reduce your liability. If you are considering a 1031 exchange, DSTs are worth your consideration. However, before investing, it is always best to consult an experienced financial advisor who can help you determine if a DST is the right choice for you.