Is a Delaware Statutory Trust (DST) Right for You? Key Questions to Ask Yourself
Investing in a Delaware Statutory Trust (DST) can be a transformative decision for real estate investors, offering benefits such as passive income, diversification, and tax deferral through a 1031 Exchange. But not every California investor will find DSTs suitable for their goals or circumstances. To determine if a DST is right for you, it’s important to conduct an honest assessment of your needs, preferences, and financial situation.
Do I Want to Be a Hands-On or Passive Investor?
DSTs are designed for those seeking a hands-off investment experience. If you’re tired of managing properties, dealing with tenants, or handling repairs—a feeling many Sacramento landlords know well—a DST could be an attractive option. If you enjoy being actively involved in real estate operations, the passive nature of a DST might not suit your preferences.
How Important is Diversification to Me?
DSTs allow you to invest in high-quality real estate assets that may be geographically and sectorally diversified. This diversification may help reduce risk by spreading your investment across multiple properties and markets.
What is My Risk Tolerance?
Like any investment, DSTs come with risks. These include illiquidity, reliance on professional property managers, and potential market fluctuations. Assess your risk tolerance to ensure you’re comfortable with the level of uncertainty that comes with this type of investment.
Can I Commit to an Illiquid Investment?
DST investments are illiquid, meaning you cannot easily sell your fractional ownership interest. Typically, you will need to remain invested until the trust liquidates, which can take several years. If you anticipate needing access to your invested capital in the short term, a DST may not be the right choice.
Am I Comfortable Delegating Management to Professionals?
DSTs are managed by experienced property managers who handle leasing, maintenance, and other operational tasks. While this relieves you of the burden of management, it also means you’ll have no direct control over the day-to-day operations.
Am I Looking for Tax Deferral Opportunities?
If you’re conducting a 1031 exchange, a DST offers a seamless way to defer California capital gains taxes while reinvesting in like-kind properties. If tax deferral is a key consideration for you, a DST may be a strategic solution.
How Does a DST Fit Into My Estate Planning Goals?
For investors focused on generational wealth, DSTs provide unique estate planning benefits. The fractional ownership structure makes it easier to divide assets among heirs, and the potential step-up in basis can minimize tax liabilities for your beneficiaries.
At Legacy, we can help you determine whether a DST is the right fit for your real estate strategy. Give our knowledgeable team a call to learn more about DSTs and if they align with the legacy you want your investments to build.
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We are passionate in our pursuit to help every investor build their financial legacy by unlocking the power of passive real estate. Through custom strategies aligned to their unique goals and needs, we provide investors with the potential for all the benefits of real estate investing without the headaches of property management.
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There are material risks associated with investing in private placements, Delaware Statutory Trusts (“DSTs”) and real estate securities including the potential loss of the entire investment principal, illiquidity, tenant vacancies impacting income and revenue, general and real estate market conditions, lack of operating history, interest rate risks, competition, including the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and investors should read the PPM carefully before investing paying special attention to the risk section. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Legacy Investments & Real Estate is independent of CIS and CAM.