HOW TO BECOME THE ULTIMATE PASSIVE LANDLORD Enjoy the potential benefits of real estate without the headaches? “Impossible!” you say. Yet billions of dollars are invested in passive replacement real estate every year. Many of your fellow housing providers have figured this out and are making the change from active to passive ownership.
To be clear, we are not talking about exchange- traded securities. To be a bona fide real estate investment, its return must reflect the performance of the underlying properties.
A common example of bona fide passive real estate—to replace your current property—is a Delaware Statutory Trust (“DST”). All DSTs share a common trait: third parties are responsible for operating the premises.
Put more simply, investors in 1031-qualified DST programs are merely along for the ride:
✓ No purchase negotiations
✓ No leasing, deposits or evictions
✓ No bill paying or accounting
✓ No loan application
✓ No management, maintenance or make-ready hassles
✓ No sales negotiations
The suitability of any investment option depends on your preferences. Do you want to apply for your own loan and be personally liable for the payments? If so, a DST may not be a good option. Do you want to invest in smaller properties that are limited to just a few investors? Again, a DST may not be the way to go. Do you prefer an opportunity to invest in a large portfolio of properties? Perhaps the DST structure may be more your speed.
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