It seems that Delaware’s law on statutory trusts serves as an example for all real estate investors. Venture capitalists as well as practitioners have discovered that Delaware Statutory Trust investments are some of the most powerful tools that the US taxpayer has. The Delaware Statutory Trust, commonly known as the DST, is a business trust that allow you to defer capital gains under the use of a 1031 tax deferred exchange and expand your real estate portfolio. If you are in the possession of valuable real estate assets, you really should think about an IRC 1031 exchange. As long as you are able to find replacement properties, you can use the legal trust to purchase DST real estate. Successfully completing such an investment is not fairly simple, but not impossible.
The purpose of Delaware Statutory Trusts
The fact is that the DST is the first trust that holds the title of legal entity. This entity was created under the laws of Delaware for a number of transactions. Essentially, the DST is a trust for federal tax purposes. One of the benefits of Delaware Statutory Trust investment is the increased cash flow. What happens is that you purchase property under the Delaware law and you open a trust so that investors can purchase potential benefit. The venture capitalists have the possibility to deposit their proceeds, but they can also purchase interest in the DST. The title of the property is held by the legal entity, in this case the statutory trust. What is worth mentioning is that the financial resources used for the purchase of real estate assets is subject to tax-deferred treatment, in other words there is not tax income.
Some of the benefits of Delaware Statutory Trust investments
There are many reasons why people choose to invest in a DST. Besides relief from tax matters, Delaware Statutory Trusts provide a good income, unlike traditional investments. Professional property owners manage the investment, so you can rest assured that your cash flow will increase with time. The trustee is responsible with the well-being for the property, so you do not have to do anything. Thanks to the DST, it is a lot easier to secure financing. More precisely, financial institutions are much more likely to provide assistance to a trust than to an individual. All in all, the Delaware Statutory Trust is worth considering as you only need a minimum investment. The reason why the amounts are so reasonable is that the trust allows for up to 499 investors.
The Delaware Statutory Trust has some drawbacks
The Delaware Statutory Trust is not actually suitable for all projects. This basically means that not all properties are eligible for 1031 exchanges. You can only exchange like-kind properties and the fact is that this form of passive investment does not pay off soon. You have to wait a couple of years in order to get a return on your investment. Once the sale is closed, you cannot contribute with money to the DST. However, these downsides are not enough to make the DST investment undesirable.
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