Do's & Don't of DSTs
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Do's & Don't of DSTs (by Ray-N-Pa [PA]) Aug 7, 2022 9:07 PM
       Do's & Don't of DSTs (by Robert J [CA]) Aug 7, 2022 9:47 PM
       Do's & Don't of DSTs (by Ray-N-Pa [PA]) Aug 8, 2022 7:47 AM

Do's & Don't of DSTs (by Ray-N-Pa [PA]) Posted on: Aug 7, 2022 9:07 PM

Doís and Doníts of DSTs

by Bryan Hakola | Nov 4, 2020 | 1031 Exchange, Diversified Investment Strategies, DST

If you are considering a 1031 exchange soon, a Delaware Statutory Trust, or DST, may be a great option for you. With a DST, you own a portion of a trust, called a Beneficial Ownership Interest. The trust owns the underlying real estate. There are multiple DST owners for each trust. This is a great option for a hands-off investment that you are not solely responsible for. This also allows you to diversify your assets more. Examples of DST real estate include multifamily apartment buildings, senior care facilities, shopping centers and more.

Your sponsor is here to help you complete a 1031 exchange, and to help you decide if a DST is right for you. There are some doís and doníts to keep in mind when considering a DST.

Hereís what you should do:

1. Do your research. Like with any real estate investment, itís important to put the time in to read the Private Placement Memorandum so you understand what is expected from you and what the DST entails. We can help you make sense of this, so you choose the right DST for you.

2. Use the DST as backup. Especially in these uncertain times, a DST makes a great backup plan for your 1031 exchange. By choosing a DST for at least one of your three identified replacement properties, you ensure that your 1031 exchange goes through even if the other two properties fall through before deadline.

3. Check the debt ratios. To ensure that you donít have to pay any federal taxes, or boot, make sure the debt ratio of the DST property works as a replacement property for your 1031 exchange.

4. Diversify. This is one of the many benefits of a DST! A DSTís minimum investment amount can be low, so you may have the option to split your investment among multiple DSTs. This could be multiple property types in multiple locations. This gives you peace of mind.

Here are some things you donít have to do when completing a DST:

1. You donít have to manage the property. You own a share in the real estate asset. The management of the property is not your responsibility. This is a great hands-off option for investors who have had it with tenants!

2. You donít take on liability. The liability of the property belongs to the owner, not the beneficiaries of the DST. Therefore, you have no personal liability for the property, which is also great during these uncertain times.

Do's & Don't of DSTs (by Robert J [CA]) Posted on: Aug 7, 2022 9:47 PM

I found that many sponsors that promise to keep a position of ownership, but sell out $25,000 portions to people with retirement accounts. Of if every owner has $300,000 in as a spot, they will sell out 12 portions at $25K for retirement investors. Then the sponsor has no ownership and if a disaster happens, they will walk away with no skin off their chest. They have other older holdings with higher equity, so why worry about a new purchase when the sponsor owns 20 other longer time holdings. --47.156.xx.xx

Do's & Don't of DSTs (by Ray-N-Pa [PA]) Posted on: Aug 8, 2022 7:47 AM

Anytime you invest there is a danger of you losing all your money. You are spot on in checking how much management is retaining in these projects.

DST routinely build those mega construction sites that have those dream home Class A Apts by the hundreds and thousands

Subject: RE: Do's & Don't of DSTs
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Do's & Don't of DSTs
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