Real estate investors always want to keep their investment running and growing. And one way of doing that is to sell a property and buy another one. But, changing properties like that means that they’re going to encounter taxes. That is where 1031 Exchange comes in. It’s a tax-deferment strategy used by real estate investors to defer paying taxes on the sale of a property. The 1031 Exchange allows investors to reinvest their proceeds into a new, similar property. In order to make the most out of this strategy, many real estate investors opt for Delaware Statutory Trust. In this blog post, we will explain the role of delaware statutory trust 1031 exchange.
Delaware Statutory Trust or DST is a legal entity that is created under the Delaware laws. This entity allows an investor to buy a fraction or a whole ownership in a property, particularly real estate, without having to hold a physical deed. This is because the DST holds the title or deed of the property. Unlike a Real Estate Investment Trust (REIT), DSTs are not traded on a public exchange. DSTs can be used as an alternative to owning, managing, and maintaining a rental property.
One advantage of using Delaware Statutory Trust in 1031 exchanges is the access to institutional-grade properties. That is, investors can pool their assets together to acquire properties that are out of reach if investing alone. These types of properties include apartment complexes, industrial complexes, and other commercial real estate properties. Having DSTs in 1031 exchanges can help in spreading the risks across multiple properties, not just a single property.
Another benefit of using DSTs in 1031 exchanges is the hassle-free property management experience. A real estate investor will no longer have to worry about paying property taxes, insurance, and maintenance expenses. A professional management team will handle all the necessary tasks and responsibilities involved in managing a rental property. Since investors will not hold the physical deeds, they don’t have to bear the burden of managing risks associated with property ownership. This is an excellent option for those investors who want to keep their hands-off and passively invest in real estate.
Delaware Statutory Trusts have a minimum investment requirement. The minimum investment requirement varies because of the different types of properties owned by a DST. On average, they require a minimum of $100,000 to $250,000 as the entry price.
The Delaware Statutory Trust in 1031 exchanges can provide an advantageous means for real estate investors to defer taxes while investing in institutional-grade commercial properties without the burden of owning and managing the property. DSTs are becoming increasingly popular in recent years as more retail investors realize the numerous benefits of using them. If you’re looking to diversify your investment portfolio and don’t have the capital, expertise, or time to manage a big rental property, consider investing in DSTs. Always consult with a qualified and experienced tax advisor or investor before taking in any potential investment decision.