A Delaware Statutory Trust (DST) is a legal entity that allows you to co-invest with other investors in one or multiple real estate investment properties.
A DST 1031 Exchange is when an investor completes a 1031 Exchange by purchasing DST interests as their replacement property. There are many potential benefits to doing so.
Potential Benefits of a DST
Passive Management: As a DST owner, you have no responsibility for the arduous tasks of property management duties. A DST is a passive investment vehicle. The property held in the trust is professionally managed by the DST sponsor’s affiliates, which handle day-to-day maintenance, upkeep, leasing, rent collections, tax and insurance payment, and the eventual sale of the property. Many investors have found this structure appealing after self-managing investment property for years.
Portfolio Diversification: Rather than owning a single investment property in one location, a DST investment can allow you to diversify your real estate investment portfolio by geographic region, tenants, industry, and asset class. Whether you invest in a single DST with multiple properties or several different DST’s with different property types and locations, a broadly diversified portfolio can help reduce volatility and concentration risk.
Institutional Quality Real Estate: Because a DST is a securitized investment structure with up to 499 investors (of which you would own a fractional share), the DST Sponsor can buy high-quality real estate assets that would otherwise be out of financial reach for most investors. In addition, these commercial real estate assets are often fully leased with investment-grade tenants, and properties may have the fully leased with investment-grade tenants, and properties may have the potential for greater appreciation than lower-quality properties. Property types include multifamily apartments, industrial warehouses, self-storage facilities, and essential health & retail.
Our guide, Tax-Deferred Strategies for Real Estate, identifies several other potential benefits of a DST that you would be interested in. Download the guide now and see what else might make a DST a compelling choice for your replacement property.