Why consider a Delaware Statutory Trust (DST) as replacement property for part or all of your next Section 1031 exchange?
If you’re tired of the “Terrible T’s” of managing Tenants, Toilets, Trash, Turmoil, and Termites, DSTs are worth a look. With a DST, all those responsibilities are shifted to professional management while investors enjoy the freedoms of passive investing. DSTs typically feature greater diversification than individuals can achieve on their own.
For a nice introduction to the subject of DST 1031 exchanges, we recommend you view the following educational video prepared by DST industry leader Inland Private Capital:
Even when limited to a secondary role, DSTs can be very helpful:
Flexibility – DSTs can make great backup replacement properties, ensuring compliance with the rigid timelines of a 1031 exchange. Consider the inclusion of one or two DST owned properties during the 45-day identification period. There is no added cost for taking that precaution.
Avoid Taxable Gain on “Boot” – Coordinating the exact dollar amount of a replacement property relative to the relinquished property is a common challenge in 1031 transactions. Instead of incurring partial taxation (Boot), a DST can bridge any shortfall in the cost of the replacement property. Minimum DST investment is only $100,000.
Of course, investments in DST owned properties entail risks — some of which are common to any form of commercial real estate while others accompany the DST structure. Before investing these must be carefully considered in the light of each investor’s circumstances. Note that only “accredited investors” are eligible to invest in DSTs. “Accredited investors” meet high income thresholds OR have a net worth (excluding primary residence) of $1 million or more.
For more information, please contact us to speak with one of our Certified Financial Planner™ Professionals. Consult your tax advisor before entering into a 1031 exchange transaction.