There is not one but many reasons why you should invest in DSTs. Some of them are –
- Firstly, DST investments are considered as real estate investments. Therefore, when you buy DST shares, you’re actually investing in real estate properties.
- DSTs mainly have big institutional-grade properties in their portfolio, which means by investing in DSTs, you can get hold of institutional-grade properties.
- DSTs generally have a large structure. A single DST may have a hundred or more investors.
- Due to its large structure, a DST investment may start from as low as $100k. This enables the small investors to own institutional-grade properties along with other investors, which otherwise they may not be able to purchase.
- DST properties often come with pre-arranged property or asset managers, which means DST investors don’t need to bear the burden of property management.
- DST investors can split their proceeds and invest them in different properties or assets. By doing so, they can diversify their investment portfolio.
How can a DST investment secure your future?
Unlike any other investment, DST investment not only guarantees a regular flow of income, but it also makes an investor’s life easy by lifting the burden of property management from their shoulders. Let’s explore the benefits of DST investment-
- Relief from property management – DST investors don’t need to bear the burden of property management as DST properties often come with pre-arranged property or asset managers.
- Gain non-recourse debt – Almost every investor looks for pre-arranged and non-recourse financing with instant approvals. As a DST investor, you can invest in properties ranging from all-cash debt-free acquisitions to properties with up to 85% leverage.
- Low investment – As DSTs generally have many investors, a DST investment may start from as low as $100K. This allows small investors to invest in DSTs without spending too much capital.
- Diversification – As a DST investor, you can split your proceeds and invest in different properties or assets. By doing so, you can easily diversify your investment portfolio.
- Locate properties without sweating – The real estate firm or the sponsor is responsible for locating DST properties. Therefore, as a DST investor, you don’t need to get on the street for locating properties.
- Tax Advantages – DST investors can withdraw their proceeds and invest it in different properties or assets using a 1031 exchange. By doing so, they can defer up to 100% capital gains tax. Apart from this, DST investors may also benefit from depreciation and other deductions, which shelter some of their investment income from taxes.
Why are DSTs ideal investment options for 1031 exchange investors?
So, how do DST shares work as ideal replacement options for 1031 exchange investors? As you may know, 1031 exchanges allow investors to defer capital gains tax on exchanging an investment property for another like-kind property. As DST properties are also held for use in trade, business, or for investment purposes, they do qualify for 1031 exchanges. That’s why DST shares work as ideal replacement properties for 1031 exchange investors.
Now, let’s see why you should choose DSTs when doing a 1031 exchange. As per the rules, 1031 exchange investors get a time limit of 180 days for completing each exchange. From identifying the potential replacement property to acquiring it, everything needs to be done within these 180 days. If you acquire any investment property as your 1031 exchange property, then you won’t get any other benefit apart from the opportunity to defer capital gains tax in 2021. Whereas, by investing in a DST, you can get hold of a management free institutional-grade property and still defer up to 100% capital gains tax. Therefore, if you mix 1031 exchange with a DST investment, you can enjoy numerous benefits and tax advantages.