DST Real Estate to defer your capital gains tax

Have you owned real estate for 10,20,30,40+ years?

Is your property fully depreciated? 

Are you concerned about selling your investment properties and paying the capital gains tax?

Have you heard about the Delaware Statutory Trust? 

A solution to you concerns may be the the Delaware Statutory Trust (DST) for your real estate. If you have done a 1031 exchange in the past and exchanged your real estate for like kind property, this is your bread and butter. A DST is similar to the 1031 exchange, however, instead of exchanging your property for another physical property, you can exchange for an institutional grade real estate. 

How is this possible?

A DST Real Estate transaction uses the same parameters in a 1031 exchange transaction. When you sell your investment property, you use the same process of setting up your qualified intermediary prior to escrow closing. Once your proceeds hit your qualified intermediary, you now have the option to exchange your proceeds into a like kind property. This is defined by the Internal Revenue Service (IRS) in section 1031 of the IRC. Since DST real estate is considered like kind property, this allows you to defer your capital gains tax by investing into this large $100m-$300m properties. 

How Does This Work With Large DST Real Estate?

When you do a 1031 exchange into a DST Real Estate opportunity, there are some positive benefits like:

• Defer Capital Gains Tax
• Passive Monthly Income
• Appreciation Benefits
• Depreciation Benefits 
• Swap till you Drop
• Estate Planning
• Step Up in Cost Basis at FMV

When you 1031 exchange your proceeds into these large properties, you become a fractional owner of these properties with multiple other inventors. Instead of owning the property and managing yourself, you become a passive investor. As a passive investor you receive passive monthly income just as if you actively owned the real estate . Your fractional ownership give you a percentage ownership in the property, giving you the potential for appreciation when the property is sold. Along with these benefits, you will receive accelerated deprecation benefits for a tax deduction to offset some of the passive income you  will receive. When the DST Real Estate is sold, you have the opportunity to do a subsequent exchange into another DST Real Estate opportunity. This means you can swap till you drop, and never have to pay the capital gains tax. This means your heirs will inherit the DST Real Estate at a stepped up cost basis at the fair market value at the date of death. This give your heirs the opportunity to sell their beneficial ownership with a minimal tax liability. This is a great estate planning tool for those looking to pass on their real estate portfolio to their heirs. 

This all sounds great, but what are the downsides of the DST Real Estate?

**The properties depicted here are representative examples of the types of property that can be owned within a DST. They are not intended to depict or represent any particular investment offering.

The Downsides of the DST Real Estate transaction-

All the above may sounds great, and promising, but with every investment, there is risk. Below are some of the risks associated with the DST Real Estate transaction:

• Limited to no liquidity 
• 7-10 year hold
• High fees and commission
• Reduction of income 
• Loss of principal investment
• Poor DST management 

The DST Real Estate transaction has a typical life span of 5-7 years before the property is sold. This is a historical average from all top DST companies. If there real estate cycle is in a down market, this may push this time frame closer to 10 years. You are at the discretion of the DST company to determine the best time to sell. This is the reason why there is no liquidity in a DST Real Estate investment. When the DST Real Estate is sold, you then have the liquidity and the option to do what you please with the proceeds. There can be very high fees associated with certain DST sponsors. The typical fee range should be 5-10% for total fees. Anything over 10% is considered to be high risk. Despite the fees being factored into your ownership, this can impact your potential for appreciation. The fees associated with the DST Real Estate, brings down your fractional ownership. If the DST Real Estate does not appreciate at or above what the total fees were, you will take a loss on your principal investment. If the DST company does not have proper real estate management experience, you could see a reduction of your income. 

Choosing the right dst company

Outlining the pros and cons of the DST Real Estate opportunity, it is critical to choose the right sponsor. We work with the top DST companies in the industry, and have for years. If you are considering selling an investment property, in the process, or in your 45 day ID and would like to discuss your transaction with us and see if we can work together. We will gather all your relevant information regarding your transaction. Any debt that needs to be replaced. Your short term, and long term investment goals. We will evaluate your transaction and your objectives to find a viable DST Real Estate opportunity for you. We work with many different DST companies to ensure proper diversification. Please fill out the form below, or call 805-603-4378 to speak to a representative today! 

*Disclosure:

This website is neither an offer to sell nor a solicitation of an offer to buy any security which can be made only by a prospectus, or offering memorandum, which has been filed or registered with appropriate state and federal regulatory agencies, and sold only by broker dealers and registered investment advisors authorized to do so. Additionally, we cannot offer any of our open offerings unless we have a pre-existing relationship with a customer. Once we have obtained sufficient information to perform an evaluation of our new customers’ financial circumstances and sophistication in determining his or her status as an accredited investor, we would be able to discuss future offerings once they become available.

Additionally, we cannot offer any of our open offerings unless we have a pre-existing relationship with a customer.  Once we have obtained sufficient information to perform an evaluation of our new customers’ financial circumstances and sophistication in determining his or her status as an accredited investor, we would be able to discuss future offerings once they become available.

Diversification does not assure or guarantee better performance/profit and cannot eliminate the risk of investment losses in declining markets