Delaware Statutory Trust

A Delaware Statutory Trust (DST) is a legal entity formed under Delaware law that allows multiple investors to hold fractional ownership interests in real estate assets while providing liability protection and potential tax benefits.

DSTS

Features

DSTs are responsible for buying, managing, administering, and selling real estate properties. A real estate firm, also known as the sponsor, acquires properties under the DST umbrella and then opens it up for investors to buy fractional ownership in those properties. Any investor can buy DST shares with the help of a broker. Investors within a DST own the entire property and not a particular portion of it.

DST's are known for their large structure.

DSTs generally have a large structure that can accommodate a hundred or even more investors. Unlike TICs where the number of investors is limited to 35, DSTs don’t have any limitation on the number of investors they could possess. Due to its large structure, a DST investment may start from as low as $100K. This allows small investors to own institutional-grade properties along with other investors, which otherwise they may not be able to afford individually.

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They let investors own institutional-grade properties.

DSTs generally have large institutional-grade properties in their portfolio. Therefore, DST investors own large income-producing properties without spending the amount required to own such big properties. Another benefit of investing in DSTs is that they provide much-needed diversification to investors. DST investors can split their proceeds and invest it in some other properties or assets. This way, they can invest in different grades of properties and diversify their investment portfolio.

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MORE BENEFITS

OF A DST INVESTMENT

Relief from Property Management

DST investors don’t need to bear the burden of property management as DST properties often come with pre-arranged property or asset managers.

Increased Cash Flow

On a general, DST investors enjoy a cash flow ranging from 5%-7% annually. Whereas, after adding capital appreciation and the amount invested in amortizing the asset, the projected annual return may increase to 14%-18%.

Locate Properties Without Sweating

The real estate firm or the sponsor is generally responsible for locating properties. Therefore, DST investors don’t need to get on the street for locating properties.

Multiple Tax Advantages

Using a 1031 exchange, investors can defer capital gains tax on exchanging an investment property for DST shares. Not only this, but DST investors may also benefit from depreciation and other deductions, which shelter some of their investment income from taxes.

1031 Exchange In and Exchange Out

Investors not only can invest their 1031 exchange proceeds into a DST but they can also withdraw their proceeds from a DST and invest it in other properties or assets.

HOW TO

How you can complete your 1031 exchange with a DST Investment?

As DST investors enjoy ownership in real estate properties and not in the trust, DST investment qualifies for 1031 exchange and DST shares are offered as real estate securities to 1031 exchange investors. In other words, you can buy DST shares as your 1031 exchange replacement property. Let’s see how?

Identify the investment property you want to relinquish and list it for sale.
Enter into a 1031 exchange agreement along with a Qualified Intermediary. Make sure you meet the requirements of the Federal Tax Law, especially the one pertaining to the proceeds.
Close on the sale of your relinquished property.
Identify different DST investment options within 45 days.
Buy the same as your 1031 exchange replacement property.
Submit form 8824 to the IRS at the time of filing taxes along with other required documents.

Still confused?

Let us help you.

No matter how much you plan, an experienced 1031 exchange advisor can help. The assistance of an advisor can overcome the challenges and seal your 1031 exchange before the deadline. Our teams also stays in touch with an investor’s attorney or accountant to ensure that the entire transaction runs smoothly.

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Perch Financial LLC and Arkadios Capital LLC do not provide legal or tax advice. Securities offered through Arkadios Capital LLC Member FINRA/SIPC and MSRB registered. Arkadios Capital LLC is unaffiliated with any entity herein.

1031 Risk Disclosure:

There is no guarantee that any strategy will be successful or achieve investment objectives;
Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
Potential for foreclosure – All financed real estate investments have potential for foreclosure; ·Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments;
Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits

No offer to buy or sell securities is being made. Such offers may only be made to qualified accredited investors via private placement memorandum. Risks detailed in a private placement memorandum should be carefully reviewed, understood, and considered before making such an investment. Prospective strategies and products used in any tax advantaged investment planning should be reviewed independently with your tax and legal advisors. Changes to the tax code and other regulatory revisions could have a negative impact upon strategies developed and recommendations made. Past performance and/or forward-looking statements are never an assurance of future results.

Many of the investments offered will be only available to those investors meeting the definition of an Accredited Investor under SEC Rule 501(A) and offered as Regulation D private placement securities via a Private Placement Memorandum (“PPM”). Prospective investors must receive, read, and understand all the risks associated with buying private placement securities. Investments are not guaranteed or FDIC insured and risks may include but are not limited to illiquidity, no guarantee of income or guarantee that all tax advantages or objectives will be met and complete loss of principal investment could occur.

Risk Disclosure: Alternative investment products, including real estate investments, notes & debentures, hedge funds and private equity, involve a high degree of risk, often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop. There may be restrictions on transferring interests in any alternative investment. Alternative investment products often execute a substantial portion of their trades on non-U.S. exchanges. Investing in foreign markets may entail risks that differ from those associated with investments in U.S. markets. Additionally, alternative investments often entail commodity trading, which involves substantial risk of loss.

NO OFFER OR SOLICITATION: The contents of this website: (i) do not constitute an offer of securities or a solicitation of an offer to buy of securities, and (ii) may not be relied upon in making an investment decision related to any investment offering by Perch Financial LLC, Arkadios Capital LLC, or any affiliate, or partner thereof. Perch Financial LLC does not warrant the accuracy or completeness of the information contained herein.