If you are interested in investing in real estate property, you need professional real estate managers to buy, sell, and reinvest in the related sphere. One such management company is the 1031 real estate exchange, proficient in administering real estate investment in the 1031 exchange and tax regime of the jurisdiction. They consider all potential risk elements of property investment and land regulation of the 1031 area.
They are knowledgeable about Delaware Statutory Trust (DST) guidelines, and the jurisdiction of the 1031 exchange area is akin to it. Investment in these areas is subject to certain tax benefits you can avail of such tax adjournment.
Separate legal entity
Under the jurisdiction of Delaware, DST is deemed to be a separate legal unit where you can hold one or more property titles that generate regular income. The nature of the holding can be varied, ranging from apartments, commercial buildings, industrial parks, and retail space to office edifices. As an individual, you can hold several properties simultaneously, but you only have a beneficial interest in the property, and the trust is the legal owner of the underlying property. On a pro-rata basis, you enjoy the portion of income and appreciation of the DST assets.
$100,000 for 1031 exchanges
There are several benefits related to DST investment. The prime one is you can invest as little as $25000 as cash investment and $100,000 for 1031 exchanges with no property management expenditure. The share of rental income from DST property is paid on a monthly basis and credited to your bank account. The sponsor affiliate trustees manage the property on behalf of the investors, and your investment is put in different properties geographically and functionally. As a DST investor, it is not mandatory to maintain any special purpose LLC to hold the legal title, like a tenant in the common TIC agenda. The DST protects you from any liabilities arising from the underlying property.
3 companies
DST properties are categorized under the 1031 exchange that permits you to sell an investment property and purchase a similar property with the intention to postpone capital gain and depreciation recapture taxes. At the initial stage of DST, there were three companies; Triple Net, Passco and Inland; the first one was reverse merged with Grubb Ellis Company, and the last two still exist in DST. In 2008 during the housing boom era, the demand was so high the number of sponsors surpassed a hundred. After the housing bubble period in 2209-2010, major (around 80%) of investment consolidated in two entities, Passco and Inland.
1031 exchange
Selling a commercial property for a hefty profit is always welcomed by investors, but the flip side is it attracts capital gain tax calculated on the amount of profit. Fortunately, there are several schemes where you can defer the capital gain tax, and such a specialized investment vehicle is Delaware Statutory Trust (DST). For instance, if you purchased a commercial property at $100,000 and sold it at $150,000 after ten years, the calculated profit is $50,000 and taxable. The taxable amount depends on the tenure of the holding and the investor income tax slab. But the tax could be deferred if you reinvest the proceeding in the same kind of property (replacement property) categorized as 1031exchange. In DST investment, you can avail of this tax relief.
