Delaware state law, for the purpose of owning and operating investment real estate on behalf of accredited investors. All of the stakeholders own a pro rata beneficial interest in the underlying property of the trust. They each receive
their share of any distributable income and any net appreciation upon sale. With 1031 DSTs, individual owners have the opportunity to diversify their equity across multiple states, various property types and even thousands of tenants—with only a few hundred thousand dollars. Multifamily is the most popular type of DST, but options include self-storage, industrial, senior living, retail and healthcare. For rental owners with debt, replacing their loan in a 1031 exchange can be challenging. Indeed, some landlords would rather keep their property than obtain a new loan. 1031 DSTs solve
this problem by offering built-in debt. Investors are not a party to the loan agreement and do not have to qualify for the loan—it was already in place when the DST acquired the property. Yet 1031 DST investors are able to claim their pro rata share of the loan for purposes of a 1031 exchange. After the DST trust manager sells the property (typically in 6 – 8 years), the investors may either pocket the proceeds and pay the taxes, or conduct another 1031 exchange. Since the IRS approved 1031 DSTs in 2004, most people whose investments went “full cycle” have elected to roll their equity into another 1031 DST.
basic attributes of dsts:
Passive investing—no participation in acquisition, operation or disposition of properties Institutional management Built-in, non-recourse, no-application financing Constantly changing menu of investment property options Flexible investment amounts Customizable investment property portfolios Digital investing–no escrow, no notary
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