Six Benefits of Exchanging Delaware Statutory Trust Assets

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There are many potential benefits associated with converting to Delaware Statutory Trust (DST) 1031 Property.

However, it is important to note that these potential benefits should always be carefully weighed against the potential risks that are possible with DST investing, and as with all real estate investments, investors should do their due diligence before investing. A tax attorney and or certified public account should be consulted. dst.

Still, DST continues rise in popularity, Especially among aging Baby Boomers who are tired of managing their own assets and are looking for a way to transition to a passive income stream. DST Investments not only provides passive income potential to the investors but also provides the following six benefits.

1. Tax Deferral Using a 1031 Exchange

Many real estate investors have been looking to sell their rental and commercial properties for years, but haven’t been able to find a property to exchange for and can’t stomach the tax bill after adding in federal capital gains tax, state capital gains tax, . the depreciation recapture tax, and the Medicare surcharge. DST 1031 Property Solutions offers investors the ability to move from an active to a passive role of real estate ownership on a tax-deferred basis.

2. Eliminate the headache of property management

Because many DST investors are at or near retirement, they are tired of the hassles often brought by real estate ownership and management. They are tired of tenants, toilets and waste and want to move away from active management of properties. dst provides 1031 assets passive ownership structure, allowing them to focus on other things instead of asset management headaches, while enjoying retirement, grandparenting, travel and leisure.

3. Increase in Cash Flow Efficiency

Many investors are receiving low amounts of cash flow on their existing properties, which may be due to under-market rents, vacancies, or vacant land lying idle at their properties. DST 1031 exchange properties offer investors the opportunity to potentially increase their cash flow through a tax-deferred 1031 exchange.

4. Portfolio Diversification

Often, 1031 investors are selling a property that contains a substantial amount of their net worth. They want to reduce their potential risk, and instead buy a property (such as another apartment building) or a nnn building (such as a Walgreens pharmacy or a Taco Bell restaurant), they decided that investing in a various DST 1031’s portfolio of properties with multiple locations, asset classes (property types) and tenants is better suited for their goals and objectives.

This is similar to how investors invest retirement funds in mutual funds and exchange-traded funds (ETFs) as opposed to keeping all of their retirement savings in the stock of a particular company. However, it is important to note that there is no assurance that diversification will result in profit or guarantee against loss.

5. Locked-In Non-Recourse Financing

one of the requirements for a 1031 Exchange You have to take out an “equal or greater loan” in exchange for what you had in the abandoned property (the property you are selling). In today’s lending environment, it is often difficult for investors to obtain non-recourse financing at acceptable interest rates and terms. Because the sponsors of DST 1031 properties typically have strong credit relationships, they are able to secure non-recourse financing at some of the best terms available in the market. DST 1031 investors are the direct recipients of these financing terms that they otherwise often would not be able to obtain on their own.

6. Access to Institutional-Grade Real Estate

DST 1031 properties provide access to large, institutional-grade real estate Which is often outside the price point of an individual investor. With a typical minimum investment of $100,000, investors are still able to purchase ownership interests in large $20 million plus apartment communities, $5 million plus pharmacies, or $15 million grocery stores, for example. This allows investors to access a level of real estate that they previously could not exchange.

That being said, we also have many clients with very large 1031 exchanges who choose to invest in DST 1031 properties because they didn’t want to “put all their eggs in one basket” by purchasing a single, large investment property.

For more information about Kay properties or to review the current list of 1031 exchange-eligible properties, please visit kpi1031.com to get your free 1031 Exchange Toolkit.

Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.