What is DST? In a nutshell, it is the acronym for the Delaware Statutory Trust. It has gradually become a popular choice for today's fractional-ownership Section 1031 tax-deferred exchanges. A majority of DST 1031 exchange programs (many include multiple properties) is sponsored by national real estate companies, and are provided through securities broker/dealers. Typically, DST, as a source of replacement property, is commonly used by smaller, baby boomer investors for whom real estate is not their main business. They probably own a multifamily property, a rental house or two, or retail center, or even a smaller office building. Every property requires some sort of active management. After reaching the retirement age, a lot of these investors look to cash in on their real estate investments that are tax-deferred, of course. DST 1031 exchange can also assist real estate investors in addressing the traditional challenges of a 1031 exchange, especially the challenges of replacement property identification. DSTs Today Research shows that the industry saw more than $1 Billion of securitized exchanges in 2015, but a major resurgence from the depths of the recession. Latest industry estimates indicate that such exchanges will surpass $1.6 billion this year. It also states that 96% of the equity exchanged in 2015 came through DSTs. A few TICs came from smaller sponsors. The DST is a lot simpler and less expensive than the TIC structure. Usually, the lender gives only a single loan to the trustee of the DST, and not to each investor. The debt is, therefore, "nonrecourse" to the investors. Since a DST is absolutely unlimited in its number of investors, the minimum exchange amount is only $100,000. Investors are required to execute only a single agreement. As there is no Co-Ownership Agreement among the investors, no DST investor is threatened by the actions of any other investor. Types Of DST Property But, you can also expect net-leased retail and master-leased apartments to continue to be the most attractive for DST exchangers. Another growing trend from larger sponsors is the rising number of offerings with multiple properties in a single DST. It is partly to accommodate the rapidly increasing demand. Inland Private Capital, which registered 42% of 2015's transaction amount recently offered a portfolio of 17 self-storage properties in three states. Property Identification You guessed it right! The conventional three-property ID rule will not cover the multiple-property offerings mentioned above. Exchange experts say multiple-property DSTs bring into play the 200% rule. This means the exchanger can identify more than three properties till the time their combined fair market value does not cross 200% of the market value of the relinquished property. What's more, a DST 1031 exchange may actually end the need for identifying any property. If all the replacement properties are closed within the initial 45-day period, then the taxpayer is not required to provide a separate written ID. Individual tax situations can differ and can be quite complex. It is advisable to seek guidance from a tax professional in a specific situation. If you are searching for DST exchange, call 1031 property at 1-888-876-6005 or drop an email: [email protected]
2 Comments
10/17/2019 12:44:29 pm
It's interesting to know that DST is commonly used by smaller investors for whom real estate is not their business. My brother is reaching retirement age, and he is thinking about selling some of his properties. I will let him know about your article to help him understand what DST is all about.
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Lisa
10/17/2019 10:56:09 pm
Ok can you share your communication detail like phone number for more detail
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