The Simple Solution for a 1031 Exchange  As a 1031 exchange investor, you might consider investing in a Delaware statutory trust. DST’s qualify for full tax deferral under IRC section 1031 and offer a fractional approach to purchasing one or more institutional grade properties in multiple industries, such as: healthcare, multifamily, industrial, and essential services. DST investment programs offer a pre-structured and diversified solution to the 1031 exchange process. Investment objectives include projected monthly cash flow, professional third-party management, and immediate closing. The $3.5 Billion 1031 DST industry has increased in popularity as a growing number of investors are seeking access to high-quality, income-producing real estate, along with freedom from the burden of day-to-day property management.

1. Freedom from Management Responsibilities

DSTs are managed by professional, third-party firms. For investors transitioning from actively managing properties to passive ownership, this alleviates the burden of property management and replaces it with time for travel and leisure. Ownership distributions from cash flow are paid monthly. Investors receive monthly operating reports and a year-end tax package directly from the management firm.

2. No Personal Liability

DST’s are offered as both all-cash and leveraged programs. For leveraged programs, the debt financing is non-recourse to DST investors. The Sponsor is the guarantor of all recourse obligations under the loan agreement. DST investors have no liability to their personal assets due to the bankruptcy- remote provisions of the DST. Additionally, since an LLC entity is not required to hold the DST interests, investors do not have to incur annual state filings and the fees typically associated with co-ownership.

3. Ease of Financing (Debt Replacement in a 1031 Exchange)

The first mortgage for the DST property is obtained by the Sponsor and is recorded on the property prior to the investors taking ownership of the DST. DST investors are allocated their portion of the debt based on their pro rata share of ownership. The DST eliminates the need for investors to obtain individual financing on their own, as the DST is the single borrower. Many DST investors appreciate having “in-place” financing that is set and secured with known rates and terms.

4. Low Minimums

Because a DST Private Placement Offering allows for fractional ownership, the minimum investment amounts are much lower than if an investor were to individually purchase a whole property. Most DST investments have a minimum equity investment requirement of just $100,000, which makes it easy for DST investors to diversify their portfolio.

5. Higher-Value Properties

A DST is a “pooled-equity” investment which allows investors to collectively purchase a property of higher value by aggregating their equity together. More combined equity means more buying power, and with that comes the opportunity to purchase properties that might otherwise be out of a single buyer’s reach. These higher valued properties may also be more attractive and better suited to an investor’s individual preferences.

6. Diversification Strategy

DST investing offers maximum diversification. The low minimum investment requirement allows investors to make smaller investments in multiple DST’s rather than purchasing a single, sole-owned property. In addition, many DST’s own multiple properties, which further enhances diversification and reduces risk of ownership.

7. Tax Benefits of DSTs

DST Investors have direct ownership in the real estate through a Trust Agreement with the Trust. The benefits of direct ownership in the real estate, such as mortgage interest deductions and depreciation, flow through to the individual investors on a pro rata basis. Investors can therefore reduce their individual tax liability on the distributions they receive from DST interests.

8. No Additional Costs

All transaction costs are included in the total DST offering price. Costs for legal, financing, title, escrow, appraisals, third-party reports, commissions, loan reserves, and closing costs are included in the total DST offering price.

9. 1031 Exchange Protection

The 45-day “Identification” or “ID” period is a short window for most 1031 exchange investors to find and nominate quality 1031 exchange replacement property. Since DST investments are already acquired and ready for an investor’s exchange, the closing process into the DST can take as little as three (3) business days. For those investors who are ready to exchange into the DST upon their close of escrow, this expedited closing process greatly reduces the risk of missing the IRS exchange deadlines (45-day ID period and the 180-day total exchange period).

10. Estate Planning

As investors begin to think about bequeathing investments to their heirs, real estate investments can be tricky, especially if the heirs are not experienced in commercial real estate. Upon transfer of death, heirs may receive distributions on a pro-rata basis, and upon the sale of the DST investment, each heir may choose what to do with their inherited portion of any proceeds individually. The heirs receive a step-up in basis and can continue to exchange property interests, while another may choose to receive cash proceeds.