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Benefits of DST Investments

Posted by : Premraj | Posted on : Friday, May 1, 2020


What would you do with profit from your real estate sale? Well, for starters, you’d have to pay tax and then decide what to do with the rest of the money. What if we told you there’s a way to defer paying capital gains tax while increasing your real estate portfolio?

That’s what Delaware Statutory Trust, commonly known as DST, entails. It comes under the 1031 exchange section of the IRS code, which allows for capital gain taxes to be deferred and replaced with a “like-kind” property. The definition of “like-kind” property excludes things like bonds, securities, and other financial assets.

While DST programs have been around since the early 2000s, they are now becoming an increasingly popular way of handling real estate investments because of the several benefits they offer. Here are five such benefits.

Avoiding Management Troubles

If you’ve ever managed property, you’ve likely met the “Terrible Ts:” toilets, tenants, and trash. But there’s also the “Terrific Ts:” time and travel. From financing, repairs, maintenance to security, managing properties, particularly rental properties, can be exacting and even frustrating. 

In a DST structure, the investor does not own the property itself but instead owns shares in it. Thus, an independent team takes over the management of the property. Of course, you may have some doubts about handing over a property you have shares in to manage. That is why you should find a company with experience and expertise in the field. That would help you enjoy the “Terrific Ts:” time and travel.

Diversify Portfolio and Reduce Risk

A good DST sponsor would have a diversified real estate portfolio across states from which you can make a choice. For instance, Capital Square 1031 boasts an array of real estate properties across the nation that you can choose from, based on your capital, debt, and equity. 

The good news is that you don’t have to fork out sums beyond your means to own parts of a property. Generally, you’ll receive low minimums per property, allowing you to diversify your real estate holdings.

The benefit of spreading out your real estate interests is that it reduces your risks. Should there be any challenge with one property, you can fall back on the others. Besides, there’s no personal liability. The next point expands on it further. 

No Personal Liability

For any investor, nothing sounds better than the phrase “no personal liability.” In other words, regardless of what happens with the investment, you would not be held personally responsible. 

For instance, with DST lenders and banks treat it as a single entity, making it possible to receive more substantial loans. If there’s ever default on these loans, the DST sponsor takes full responsibility. You are also protected from the behaviors of any of the other investors.

Additionally, there is a clear exit strategy that removes the confusion and uncertainty that comes with handling a rental property on your own. You can make future plans with a degree of certainty. 

In Conclusion

Instead of splurging your profits on things that do not have value, you can take advantage of DST investments to increase your real estate holdings. Covered under the 1031 exchange section of the IRS tax code, a DST structure allows you to defer paying capital gains while purchasing shares in a new property. A good DST sponsor can help you do this with ease. Listed-above in this article are several benefits you can enjoy from a DST program.

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