When it comes to real estate investing, many people are familiar with 1031 exchanges. However, not everyone is familiar with 1031 exchange advisors near me. In this article, we’ll break down the basics of both 1031 exchanges and DST, and explain how they can work together to benefit real estate investors.
Let’s start with the 1031 exchange. Simply put, a 1031 exchange is a type of transaction where an investor sells their property and uses the proceeds to purchase another property. The benefit of this type of exchange is that it allows the investor to defer paying taxes on the gains from the sale of their original property. There are certain requirements that must be met in order for a transaction to qualify as a 1031 exchange, but for the purposes of this article, we’ll focus on the basics.
Now, let’s move on to Delaware Statutory Trust. A DST is a legal entity that allows multiple investors to purchase fractional ownership in a property. DSTs are often used in 1031 exchanges because they allow investors to pool their resources and purchase higher-value properties than they would be able to afford on their own. The investors receive income from the property based on their ownership percentage, and the expenses and management of the property are handled by a trustee.
So, how do 1031 exchanges and DSTs work together? When an investor sells a property and wants to use a 1031 exchange to purchase a new property, they can use the proceeds to invest in a DST. The DST can then use the funds from multiple investors to purchase a high-value property that fits the investor’s needs. This allows the investor to defer taxes on the gains from the sale of their original property while also benefiting from the income generated by the DST.
There are a few things to keep in mind when considering a DST as part of a 1031 exchange. First, not all properties are eligible for a DST investment. The property must be a passive investment, meaning the investor cannot actively manage the property. Additionally, the DST must be set up and managed by a qualified trustee.
Another factor to consider is the fees associated with a DST. There are typically fees charged by the trustee for their services, and investors may also need to pay a broker or advisor to help them identify and invest in a DST. However, these fees are often offset by the benefits of investing in a high-value property through a DST.
Conclusion:
In conclusion, Delaware Statutory Trust and 1031 exchanges can be powerful tools for real estate investors. By utilizing a DST as part of a 1031 exchange, investors can defer taxes on the gains from the sale of their original property while also benefiting from the income generated by a high-value investment property. However, it’s important to work with qualified professionals when considering a DST investment, and to carefully consider the fees associated with this type of investment. With the right strategy in place, DSTs and 1031 exchanges can be a valuable part of a real estate investor’s portfolio.
