5 Reasons Why You Should Invest In DSTs

Are you considering a 1031 exchange? If you are a savvy real estate investor and thinking of selling your investment property, chances are 1031 exchange must have crossed your mind. Factually speaking, this 100-year tool involves selling your relinquished property and investing the entire proceeds in a like-kind investment property to defer the taxes on your capital gains. 

But, to make this happen, there are several things you must consider, like the strict time crunch involving a 1031 exchange and finding the right replacement properties. 

And, if you are planning to invest in multiple properties, a DST 1031 exchange procedure is worth it. 

DSTs- A Fact Check

A Delaware Statutory Trust (DST) is a real estate entity that helps the investors to earn regular passive income by becoming co-owners of that trust. Governed by several securities laws, a single DST can have a maximum of 499 investors. Moreover, the decision-making authority usually rests with a trustee who is an experienced manager designated by the sponsor of the DST. 

To set things straight, a DST is a unique real estate structure that allows multiple investors to purchase fractional ownership of an institutional quality asset. 

5 Reasons To Invest In A DST

Now that you know what exactly a DST is, here are seven reasons why investing in it is a great option-

You Won’t Have Management Responsibilities.

When doing a DST 1031 exchange, most investors usually go for multi-family properties. But, if you are a busy professional or simply want to take a break from landlord responsibilities, DST can be a safe bet. 

Because the management of a DST is managed by the sponsor or a management company, co-owners don’t have to worry about certain management responsibilities like rent collection, acquisition, property maintenance and asset management. 

You Can Have A Regular Cash Flow.

Want to earn regular passive income monthly? All you need to do is own fractional ownership of a DST. In fact, most DSTs come with assured returns. 

You Would Have To Put In Limited Personal Liability. 

In certain cases, a DST might have leverage, which would mean that the loans would be non-recourse for the investors. Simply put, investing in a DST with available leverage would not affect your eligibility to apply for another secure loan. 

You Are Co-Owners Of An Institutional Asset.

When you invest in DSTs, you become only a co-owner of that trust. And, you can use this as your leverage. With DST as your option, you can easily line up the dollar amount of your relinquished property with the dollar amount of the replacement property. 

Moreover, this notion of fractional ownership allows the property to become a part of DST 1031 exchange eligible properties. 

It Offers Diversification.

According to the rules, you can invest in DSTs with as low as $100,000. This allows the investors to divide their investments to invest in multiple properties. 

And investing in multiple properties allows you to diversify your portfolio. 

The Takeaway

When doing a 1031 exchange, it is often recommended to keep DST as one of your options. Moreover, in addition to helping you diversify your portfolio, it can be a hassle-free mode of investment. However, before you move forward with it, it is recommended to talk to a registered investment advisor.

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