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Sponsors earn compensation through fees and commissions that are included in the fees charged to investors. While all real estate transactions have costs, some investors think that the charges associated with DST investments are excessive.
The properties that a DST invests in determine the potential ROR that investors can receive. A DST's annual projected ROR can span 4-9%, while its total rate of return can far exceed this figure depending on the property's ability to appreciate.
Cons of Delaware Statutory Trust 1031 ExchangesInability to raise new capital/refinance. Once the DST offering closes, there cannot be future contributions by current or new investors.Lack of personal control. DST's are passive investments.Illiquidity.
The DST 1031 Exchange is a solution for accredited investors desiring to insulate themselves from market volatility by exchanging a single property for a diversified portfolio of passive real estate. DSTs allow investors to manage concentration risk by purchasing pieces of quality real estate all over the US.
There are four main risks associated with DSTs: real estate risk, operator risk, interest rate risk, and liquidity risk. At the end of this section, you will find a list of additional risks involved in DST investing. The most you can lose in a DST is the equity you used to purchase the investment.
What is a DST 1031 Exchange? A Delaware Statutory Trust is an entity that qualifies as like-kind real estate for the purposes of a 1031 exchange to defer capital gains taxes when selling an investment property.
DSTs can offer many retirement, tax and estate planning options. Passive income, elimination of personal liability, freedom, ability to manage cash flows and wealth transfer are just a few of the opportunities that DSTs can afford investors and their retirement planners.
DST investments are highly speculative and involve substantial risks. No public market is likely to exist for such investments, so it should be understood that there is a lack of liquidity. DST investments are not freely transferable and substantial restrictions may apply to the transfer of interests.