In this article we will be discussing the benefits of a DST. This is meant to highlight just some of the key advantages. If you’re looking for a way to invest in real estate without the hassle or commitment of being a landlord, a Delaware Statutory Trust (DST) may be a viable path. A DST is a legal entity that allows multiple investors to pool their money to invest in real estate. DST’s can be eligible for 1031 exchanges . Here are some of the benefits of investing in a DST, we have written a more in-depth overview of DST’s you can read here.

Passive Investment

As far as real estate investing goes this is one most passive options you can take. Investing in a DST allows you to be a more hands off investor. This means that you can invest in real estate without the responsibilities of being a landlord. Gone are the problems that come with property management. No longer would you have to be involved in the tenants, toilets, and trash business. You won’t have to deal with property management or maintenance issues, as these will be handled by the DST. You can sit back and collect passive income without the headaches of managing a property. 

Access to Institutional-Quality Real Estate

DSTs invest in institutional-quality real estate properties, you may be able to diversify your portfolio with properties that would otherwise be out of reach. Most people can’t afford to purchase a $10MM triple net Wal-Mart, but owning a percentage of one is much more achievable. These types of properties can be hard to have access to. Not to mention expensive to purchase outright, but investing in a DST allows you to pool your money with other investors to access these high-quality properties. You can become a fractional owner of a much bigger property that you would not have been able to afford otherwise. This can potentially provide access to higher returns than you may be able to achieve with other types of real estate investments.

Diversification

DSTs allow you to diversify your real estate portfolio. By investing in a DST, you can spread your investment across multiple properties and geographies. This can help to mitigate risk and reduce the impact of any one property on your portfolio. Taking one property you own and turning it into fractional ownership in several different ones has great benefits. You are now diversifying by location (often several states) and by varying asset classes. A DST allows you to invest in more assets with less capital.

Tax Advantages

DSTs offer tax advantages that can be attractive to investors. Because DSTs are structured as a pass-through entity, income and expenses flow through to the individual investors. This means that investors may be able to take advantage of depreciation deductions and other tax benefits associated with owning real estate.

In addition, DSTs may offer tax-deferred exchanges. This means that if you sell a property and reinvest the proceeds in a DST within a certain timeframe, you may be able to defer paying capital gains taxes on the sale of the property. This can potentially provide significant tax benefits to investors. More on that later in the article Talk to a professional for more information about your particular situation.

Professional Management

Many real estate investors when they are done managing tenants go out and find a property management company. They quickly learn they can end up managing the property management company! It can truly be a bigger headache than its worth for many. On the other hand, DSTs are managed by professional real estate managers who have experience in managing and maintaining properties. This means that investors can benefit from the expertise of the property manager without having to do any of the work themselves. In addition, the property manager is responsible for ensuring that the property is well-maintained and generating income for investors. Much easier for investors.

Lower Investment Minimums

Investing in real estate can require a significant amount of capital. However, DSTs typically have lower investment minimums than other types of real estate investments. Most DST investments start around $50k and can be as low as $25k. This can make investing in real estate more accessible to investors who may not have the capital to invest in a property on their own.

Access to 1031 Exchanges

DSTs can be used as part of a 1031 exchange. This means that if you sell a property and reinvest the proceeds in a DST within a certain timeframe, you may be able to defer paying capital gains taxes on the sale of the property. This can provide significant tax benefits to investors who are looking to exchange one property for another. For a more detailed explanation on 1031 exchanges and how they work you can check out our article here.

Investing in a Delaware Statutory Trust (DST) offers numerous benefits for real estate investors seeking a passive, diversified, and tax-advantaged way to grow their wealth. By providing access to institutional-quality properties and professional management, DSTs allow investors to enjoy the rewards of real estate investment without the headaches of property management. The ability to diversify across multiple properties and locations further mitigates risk, while lower investment minimums make it accessible to a broader range of investors.

It’s important to work with qualified professionals and follow the rules and requirements carefully in order to ensure that the exchange qualifies for tax-deferred treatment. Investors should consult with a tax advisor, attorney, and qualified intermediary to determine the best strategy for their specific situation and to ensure that they are in compliance with the IRS regulations.