It can be difficult to navigate the financial world, particularly if you are unfamiliar with all of the available resources. The DST is one financial structure that has attracted a lot of interest. You can use the DST as an effective tool for diversification and possible tax benefits if you understand it.
A DST: What is it?
DSTs, which were created in accordance with Delaware law, enable several investors to own a portion of real estate. Smaller investors now have the chance to take part in bigger, possibly more lucrative real estate transactions thanks to this special framework.
All beneficiaries’ (investors’) liability in a Delaware Statutory Trust is capped at the amount they each contributed to the trust. Additionally, DSTs may offer tax advantages, especially when included in a 1031 exchange.
Spreading your bets among superior real estate assets
The chance to diversify your real estate holdings is among the most alluring benefits of investing in a DST. Typically, a DST owns a portfolio of institutional-quality commercial properties located in several geographic areas, including office buildings, retail establishments, multifamily housing, and industrial assets. You are less vulnerable to regional market swings and dangers unique to a given property because of this diversity.
Passive income but no active management duties
You may take advantage of real estate ownership without having to deal with the hassles of ongoing property management when you have a DST. You can earn passive income distributions from the property portfolio because the trust structure transfers property management responsibilities to qualified operators. Because of its structure, DSTs are a great choice for investors looking to streamline their investment portfolios or move away from active real estate management.
How does DST operate?
Investment properties are purchased, managed, and sold by the trustee, which is usually a sponsor firm with real estate experience. Beneficiaries or the investors receive income distributions from the trust’s operations and possess a pro rata portion of the trust. In order to create a DST, the trust must be established in accordance with Delaware law, investment property must be purchased, and beneficial interests must be sold to investors.
Does a DST make sense for your investment plan?
DSTs do have some risk, though, just like any other investment vehicle. The return on investment may be impacted by variables like property performance, market conditions, and tax law changes.
