As a property investor, you’re probably aware of the 1031 exchange provision designed to defer tax liabilities. The provision allows you to sell an investment property, reinvest your proceeds into another property, and defer capital gains taxes. As such, you will be able to enjoy all the purchase price in your reinvestment. However, you may wonder why most investors prefer Delaware Statutory Trusts (DST) as their 1031 exchange vehicle. This post will explore the reasons why DSTs are the preferred choice for dst 1031 investments.
Limited Personal Liability and Diversified Investments
DSTs give investors a level of protection they would not have if they directly owned the rental property. In other words, buying DSTs gives them limited personal liability. Essentially, it means that if a tenant gets hurt or any loss arises, the investors’ financial liability would be limited only to their investment. Moreover, a DST deals in diversified investments, thus spreading the risk over several properties.
Investing in a DST means you do not have any responsibilities of property management. The DST sponsor handles all day-to-day operations of the property you invest in. From maintenance to tenant relations, everything is taken care of for you. Therefore, this leaves you ample time and resources to focus on other investment opportunities.
DSTs are designed to include higher-quality properties that come from institutional owners. These could include hospitals, chains of stores, and smart-office buildings, among others. Because of this, DSTs are known for having a stable market and consistent cash flow possibilities.
Lower Investment Entry Requirements
One of the key benefits of investing in a DST is the reduced investment entry requirements. Individual investors can typically participate and invest in a DST for as little as $100,000. This gives investors the ability to diversify their assets at an affordable price point.
A Proven Track Record
DSTs have a proven track record of helping investors defer taxes on the sale of their investment properties. Delaware Statutory Trusts are recognized in IRS code. Additionally, DSTs that have been established for more than a decade have been successful in providing returns.
In summary, investors looking for the best 1031 exchange vehicle to defer their taxes have a plethora of options to choose from. However, we have highlighted the top five reasons why Delaware Statutory Trusts are the more preferred choice. With minimal investment, professional management, a diverse set of high-quality investment options, and reduced personal liability, DSTs are ideal for those who want to make the most out of their investment opportunities. Ultimately, determining whether a DST is the right investment vehicle for you will require a conversation with your accountant or tax advisor.