DST 1031 Exchange
Delaware Statutory Trust (DST) acts as passive investment option for the investor. DSTs allow the investor to co-invest with other 1031 exchange investors in one or more institutional-grade properties. Under DST, the owner of the property is assigned a fractional ownership of equity and debt, fulfilling the exchange requirements of the investor.
Investor receives 1099 for ordinary income, 1098 allowing for mortgage interest write-off, and an operating statement or profit and loss statement for depreciation. DST helps the investor to enjoy the benefit of owning real estate without dealing with day-to-day responsibilities of managing the real estate.
What Is A Delaware Statutory Trust (DST)?
The legal entities that are created as a trust under the Delaware Statutory Law are known as Delaware Statutory Trust. Under DSTs the investor owns a proportional interest along with the rights to distribution from the rental income or sale of the property.
DSTs were established in the year 1988 by the Delaware Statutory Trust Act, and were recognized by the state law. These are formed as a private governing agreement under which a property is managed, held, administrated, and invested. DST investments are offered as replacement properties to investors looking for deferring capital gains taxes with 1031 Exchange. The main benefit of investing under DST is that under this even small investors are allowed to acquire a share of interest in comparatively large and developed properties. DST properties are spread across different states of the USA.
Top Benefits of Purchasing a DST Interest
Investors purchasing an interest in a Delaware Statutory Trust In addition to all the benefits of securitized real estate, also get the following additional benefits:
- The investors get free from day to day management of the properties like without managing the property the investor may enjoy more leisure time to relax and pursue other interest. The investor can also lease the property, collect rent, service the mortgage and handle the other responsibilities by residing far from the location.
- In DST the investment can be diversified as the net proceeds can be split among several different markets and asset types, like if you don’t want to invest your entire amount in single property then you can split your investment among multiple DST properties; so it gives you the opportunity to diversify your real estate portfolio.
- In DSTs, if the investment is made in larger and higher-quality buildings then they tend to attract tenants with greater financial strength and stability.
- DST’s create a valuable inheritance for our heirs. Suppose if you are having an intension of creating income generating investments for our heirs long after if you are gone, a DST could be a worthy investment.
- DST’s are the backup plan because during the identification period of the 1031 exchange DST property can be used as one of the three candidate properties. Suppose the investor is not able to acquire the first two choices of identified candidate property to meet the deadline, DST property remains as an option that can be closed very quickly to meet the exchange deadline.
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