A Brief Introduction to DST Properties

Posted by Lisa on October 29th, 2019

A Delaware Statutory Trust (DST) is a stage that enables the investor to co-invest with other 1031 exchange investors in at least one institutional-grade properties. Under DST 1031 exchange properties, the investor is assigned partial ownership of equity and debt, satisfying the exchange requirements of the investor. Investors receive 1099 for ordinary income, 1098 allowing for mortgage interest discount, and an operating statement or profit and loss statement for depreciation. DST encourages the investor to enjoy the benefit of owning real estate without managing with everyday responsibilities of managing the real estate.

Introduction to DST 1031 exchange properties:

Delaware Statutory Trusts, or DSTs, are legal entities that are driven from Delaware Statutory Law. DSTs allows the investors to have a fractional interest along with the rights to distribution from the rental income or sale of the property.

In the year 1988, DSTs were established by the Delaware Statutory Trust Act and recognized by the state law. A Delaware Statutory Trust is formed as a private governing agreement under which a property is managed, held, invested, and administered. DST investments are offered as replacement properties to investors looking for deferring capital gains taxes with 1031 Exchange. It is a blessing for small investors as it allows them to get a portion of interest is comparatively huge and developed properties. DST properties are spread crosswise over different states of the USA. That is managed by professional real estate asset managers or property managers.

As we know, ‘Investments are subject to market risks,’ and to reduce such risk, a real estate investment known as Delaware Statutory Trust or DST 1031 exchange properties offers the same benefit to its investors.

Benefits:

1. DST properties create a profitable legacy for our heirs. Suppose if we are having the intention of creating income-generating investments for our heirs long after if we are not here, a DST could be a valuable investment.  

2. DST properties act as the backup plan because, during the identification period, These properties can be utilized as one of the three candidate properties. Suppose if the investor is not able to acquire the first two choices of identified candidate property to meet the deadline, DST properties remain as an option that can be closed very quickly to meet the exchange deadline.

3. It gives the investor the opportunities for the diversification of the investment like if you would like to prefer not to invest your entire money in the single property then at that point you can part your investment among multiple DST properties; so it offers you the opportunity to diversify your real estate portfolio.

Do you think DSTs are the right option for us?

Now you must have developed a better understanding of Delaware Statutory Trusts, and now you need to choose whether it's the best kind of investment for you to make. The current tax laws have made DSTs a preferred investment vehicle for passive 1031 exchange investors. DSTs gives many potential advantages to investors, acting as a powerful tool for building and saving wealth.