1031 Exchange Questions
Frequently asked questions about 1031 Exchanges and Delaware Statutory Trusts
What is an "Accredited Investor?"
As defined by the SEC, an accredited investor is an individual who has either a $1 million net worth excluding their primary residence or $200,000 of income individually or $300,000 joint income for each of the last two years with a reasonable expectation for the same in the current year.
How long are DSTs held?
DSTs are held for anywhere between 3 – 10 years. Should investors want to exchange out of the property, conservatively, the DST property should be held for a minimum of two years. Typically, the DST loan’s prepayment penalties become palatable after year 3. DSTs with debt in place are not allowed to refinance, as such with 10-year fixed rate commercial debt, 10 years becomes the maximum hold period.
Can I sell my DSTs at any time?
Should you be interested in selling your position in a DST, there is a mechanism to do so. However, it cannot be guaranteed that you will be able to sell the DST investment, nor receive your entire investment back unless the market conditions support it.
Are DSTs returns guaranteed?
DST ownership is very much direct ownership of investment real estate. Therefore, returns are not guaranteed. There are certain offerings that focus on the predictability of potential income, such as net lease offerings, due to the duration of the lease and the fact that the leases are corporate guaranteed. However, DSTs returns are never completely guaranteed.
What happens after a DST property sells?
Once a DST property sells, all DST investors will receive their pro-rata share of the sales proceeds consistent with their initial investment, including any potential appreciation. At that time, investors will have the option of either exchanging into more DSTs, exchanging into any other investment property, paying tax, or a combination of.
What makes your firm unique?
Our extensive industry experience, both in the real estate and securities world, coupled with our emphasis on education, focus on client’s objectives and rigorous DST sponsor and replacement property due diligence.
Can I speak to your previous clients?
Absolutely. Hearing from our previous clients is a great way to gain insight into our client focus, process and the replacement properties we have recommended in the past.