Author: Jeffrey Kiesnoski
In an ever increasing hot sellers’ market across the north east’s major metropolitan cities, many accredited investor property owners are getting the “can’t resist” offer on a long-term held investment property. Many of these sellers are nearing retirement age and with the rising real estate prices in these areas they are stuck with the choice of just not selling or selling and instead of making a lateral 1031 Exchange into someone else’s headache they will pay the capital gain taxes.
Little is still known to these “millionaires next door” who have options other than lateral moves into more all too common toilets, tenants & trash. Let me introduce 1031 Exchange utilizing the Delaware Statutory Trust Structure (DST).
1031 real estate exchanges utilizing the DST can be a viable alternative for many accredited investors. They can relinquish their investment properties and diversify into institutional quality securitized real estate DST’s, for as little as $100,000.00 in some cases, that can complete their exchange and give them the ability to diversify into multiple DST’s in various sectors such as net lease, healthcare, student housing etc. Theses alternative property investments are 100% passive investments to the accredited investors and hand all control over to the sponsor managing the DST. Typically, they lifespan of a DST program is 7 to 10 years.
There are unique features associated with DST’s as they come in all shapes and sizes. Some are single dwellings and others are multiple buildings in multiple states. Some are all cash offerings and some come with as much at 70% loan to value (LTV). Typically, we see offerings that are in the 50% LTV range. What’s unique about a DST is that if a seller needs to replace debt on an exchange the debt is held at the sponsor level, so the investor does not have to be underwritten nor does the debt show up on the credit of the investor yet the investor receives all of the potential benefits of the debt on the property while the debt remains non-recourse to the accredited investor.
DST’s may also be great backup ID’s for exchangers in their 45-day window in case one of their identified properties falls through, as well, they can work great for boot issues on an exchange.
As with all investments there are pros and cons and risks to any investment and one should consult with their Real Estate attorney, CPA and Registered Representative to see if a 1031 Exchange using a DST is the appropriate avenue to explore.
The acquisition or sale of a Delaware Statutory Trust (DST) for the purpose of a tax-deferred 1031 Exchange qualifies for treatment under section 1031 of the Internal Revenue Code (“1031 Exchange”). Investors will be able to sell the existing investment property or beneficial interest in a DST and complete a 1031 Exchange into another “like-kind” investment property or beneficial interest in a new DST.
There are risks associated with investing in Delaware Statutory Trust (DST) and real estate investment properties including, but not limited to, loss of entire principal, declining market value, tenant vacancies and illiquidity. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only.
The information herein has been prepared for educational purposes only, does not constitute an offer to purchase or sell securitized real estate investments, and is not meant to be interpreted as tax or legal advice. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. Please speak with your legal and tax advisors for guidance regarding your particular situation.
Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC, an SEC registered investment adviser. Insurance offered through Concorde Insurance Agency, Inc. Fortitude Investment Group is independent of CIS, CAM and CIA.,
For more information, please contact:
844-4DST1031 (844 437-8103)
Fortitude Investment Group LLC
PORT JEFFERSON NY – TEANECK NJ – MARLTON NJ – PALM BEACH FL – FORT LAUDERDALE FL
SOURCE: Fortitude Investment Group LLC