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All About DST's
What Is DST (Delaware Statutory Trust)?
A Delaware Statutory Trust (DST) a fractionalized interest in a portfolio of properties and is recognized by the IRS as "Like-Kind" property, as long as certain conditions are met.
The IRS Rules for a DST (Rev. Rule 2004-86)
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Operates as a trust rather than a partnership.
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Spends Money on repairs, maintenance, minor improvements and legal obligations.
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All available cash must be distributed to investors at least on a quarterly basis or reinvested into short-term debt instruments.
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No additional capital investments may be made after closing.
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Cannot refinance or borrow additional funds after closing.
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Cannot renegotiate a lease or enter into a new lease unless tenant defaults.
Benefits of DST Ownership
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Fractional Ownership of a portfolio of properties
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Customized investment amount
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No management responsibility
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Escrow may be closed in as little as 1 to 3 days.
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Possible diversification
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Non-recourse financing
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Limited liability
Due Diligence
DST sponsors are required to provide investors with access to property reports, appraisals enviromental reports, loan dicuments and all underwriting data.
Cash Flow
Potential for scheduled cash flows, often targeted monthly.
Passivity
The sponsor is responsible for all property management, accounting, financial reporting and investor services.
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1031 Risk Disclosure:
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There is no guarantee that any strategy will be successful or achieve investment objectives;
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Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
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Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
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Potential for foreclosure – All financed real estate investments have potential for foreclosure;
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Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
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Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
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Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits
Not an offer to buy, nor a solicitation to sell securities. All investing involves risk. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing.
Securities offered through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC is not affiliated with any other entities identified in this communication.
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