It depends on your priorities. Do you want an individual property where nobody interferes in your business or shared-ownership of a comparatively bigger property, that too, without management responsibilities? Undoubtedly, an individual investment gives you a free hand over your asset, whereas shared-ownership has limitations. However, nobody could deny this as well – individual investments are riskier. On the other hand, even in case of loss in a shared-ownership, it is evenly divided among the shareholders. So, nobody suffers alone. That’s one of the biggest reasons for the popularity of DST investments. It protects you from significant financial losses and provides a regular flow of income.
DSTs Are Privately Held Entities.
A DST or Delaware Statutory Trust is a private governing body that owns, manages, and sells investment properties. Think of it as a company that owns various commercial structures which it leases to tenants. Just like a private company, a DST is managed by a board of directors or trustees. DSTs have shareholders or beneficiaries. When you invest in a DST, you become its beneficiary. Every beneficiary in a DST receives a monthly income, which means irrespective of the market situation, DSTs offer a regular flow of income. A DST can have as many as a hundred investors, and even more. Thanks to DST’s large strength, you can invest as little as $100k and become a DST investor. Isn’t it better than individual ownership where you get nothing for such less amount?
DST Investments Are Viewed As Replacement Properties In 1031 Exchanges
As per the recent research on DSTs, the majority of DST investors were 1031 exchange investors initially. When you invest in a DST, you don’t invest in the trusts. Instead, you invest in one of the real estate that that trust owns. So, the IRS allows 1031 exchange investors to complete their exchange through DSTs. An investor can do a 1031 DST exchange if they choose to reinvest their entire sale proceeds into a DST.
Mixing DST Investment With A 1031 Exchange Removes The Pressure Of Property Identification
Most 1031 exchange investors freak out during the first 45 days of their exchange period. The reason is obvious. If you fail to identify a replacement property within the first 45 days of your exchange, consider it disqualified. Whereas, if you choose a DST investment, you won’t have to wander on the streets for property identification. You can find individual listings of 1031 DST properties for sale in a broker’s office or with a reliable real estate company.
I would like to mention again – you must know your priorities before you pick an investment. DST investment? Or individual ownership? You must know your choice, inside-out.