Real estate ownership has the potential to present a tremendous opportunity for individuals to grow their net worth through time, value-add work, and smart management. Every year, we work with dozens of owners who have acquired and managed multiple investment properties, often while maintaining their day-jobs. Eventually, real estate may end up serving as these owners “Personal Property Pension Plan,” providing them with the potential for financial security and income to live on during their retirement years.
As investment property owners age, their objectives and risk tolerance change. During the retirement years we regularly hear owners emphasizing cash flow/income and preservation of value, while reducing, or even eliminating, the time required to manage the property. Some owners move to third-party management of their properties. Unfortunately, third-party management may dilute cash-flow and this solution still does not address the fact that a significant portion of an owners’ net worth may be concentrated in a single property type such as rental homes or multi-family and in a single market, often the Greater Puget Sound. When suitable, Delaware Statutory Trusts (DST) properties may be one solution designed to address “retiring” owners’ objectives.
Delaware Statutory Trusts (DSTs) are portfolios of institutional quality property that owners can exchange their investment property into on an entirely tax-deferred basis. DSTs are structured by real estate firms with significant experience and strong operational resumes. Due to the fact that DSTs have relatively low minimum investments of $100k, owners can exchange the proceeds from a single property into multiple DSTs – creating a diverse portfolio of properties composed of multiple trust sponsors, property types, and property locations – thus serving to help reduce the risk inherent in concentrated assets.
Delaware Statutory Trusts enable owners to reap all the potential benefits real estate owners know and enjoy, which may include:
- Regular cash flow/income potential
- Continued tax-deferral through 1031 exchanges
- Potential for appreciation
- Sheltering income from taxes through depreciation
- Assisting to hedge against inflation
- Receiving a full “step-up in tax basis” upon the death of an owner
Furthermore, DSTs have the potential to be an effective estate planning tool as they require no active management and can be passed along to beneficiaries through completion of a simple and straight forward form. To learn more about Delaware Statutory Trusts, download our FREE Guide: Investing in Delaware Statutory Trusts.
Ownership of Delaware Statutory Trust property presents many of the same risks inherent in owning real estate as an asset class, including but not limited to lack of liquidity, interest rate risk, financing risk, structuring costs and fees, market conditions, etc. However, DSTs are regulated by the Securities and Exchange Commission (SEC) and are subject to extensive due diligence before being presented to accredited investors. Accreditation is necessary for investment eligibility and is defined as having a net worth in excess of $1 million, excluding your primary residence. Alternatively, accreditation can be reached through $200,000 of annual income individually or $300,000 jointly (if married) for the last three years. It is important to consider all risks when determining suitability of an investment.
Delaware Statutory Trusts are a popular option that may be used to address the changing nature of investment property owners’ objectives and market conditions. Our firm, Real Estate Transition Solutions, works diligently to understand investment property owners’ goals and objectives, followed by educating owners on various solutions that we believe best position them to help realize their objectives, and finally assisting in the implementation of the plan developed with the owner.
Priorities change as we age. As an owner, it is important to consider what your priorities are and be realistic about what the future might hold. Our firm is built on decades of experience working with investment real estate and real estate owners. If you would like to have a conversation about your objectives and the properties owned, do not hesitate to reach out to us to schedule a complimentary consultation. You can call us at 206-686-2211 or email us at email@example.com.
Roger W. Bowlin, Founding Partner of Real Estate Transition Solutions, provides exit strategy analysis, execution, income and equity replacement options for investment property owners. If you have questions relating to your investment property ownership, please email him at: firstname.lastname@example.org or call (206) 686-2211.
The information herein has been prepared for educational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. Such offers are only made through the sponsors Private Placement Memorandum (PPM) which is solely available to accredited investors and accredited entities. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney. There are risks associated with investing in real estate and Delaware Statutory Trust (DST) properties including, but not limited to, loss of entire investment principal, declining market values, tenant vacancies and illiquidity. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Diversification does not guarantee profits or guarantee protection against losses. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Real Estate Transition Solutions is independent of CIS and CAM.