When you invest in real estate and must find a tenant, you will be responsible for several aspects of the management of real estate investments such as maintaining the property and making sure that the tenant pays rent on time. However, if you would like to avoid these and still want to invest in real estate, DST 1031 services are a great option.
The Structure of a DST 1031 Investment
With a DST 1031, the property is owned by a trust. Each investor in the trust has an ownership stake in the property. This allows for you to invest in properties that you previously wouldn't be able to invest in, such as multi-family apartment communities and office buildings, as a smaller investor. Many of these properties have long-term renters who are less likely to default on their rent payments.
DST 1031 Portfolios
A DST 1031 will likely have a portfolio of properties. That way, if one of the properties defaults, the portfolio will be diverse enough that this will be less likely to hurt your investment. The properties are managed by professionals and you will receive a return on investment without any additional work.
The Simplicity of DST 1031
A DST is much simpler than a TIC structure because the lender only makes one loan to the trustee of the DST rather than to each individual investor. This makes the investment less expensive. Also, since all of the decisions are made by the trustee, this eliminates the problem of disagreements among investors. They are mostly designed for an investor who wants a basic and long-term investment that provides a passive income. A portion of the cash flow income is paid monthly.
Unlike owning a piece of real estate, DST 1031 shields you from liability beyond your initial investment. You do not have to worry about losing more than what you invested initially if the investment sours. The due diligence is handled automatically by the DST 1031 services.
When the Property Is Sold
Once a property is sold, you are allowed to perform a 1031 exchange into any type of "like kind" replacement property to defer the capital gains tax. Once the properties you have invested in are sold, there might be more capital gains that come from the appreciation. This makes a DST a great tax savings tool, and you should consult with a DST 1031 service to determine if this investment is right for you.Share