The Delaware Statutory Trust
DSTs were designed to replace the TIC (Tenant-In-Common) structure for investment into institutional real estate. While TIC is a suitable structure to invest in with a family member, close friend, or business partner, it is a problematic structure to invest in with strangers. In a DST, all investors are passive, and all decisions are made by an institution that is often a co-investor. DSTs can be very efficient at replacing debt, adding to your existing basis, and providing tax-advantaged income. Thats’ where Whitestone Wealth Management can help you at our San Antonio office.
A typical DST investment could last between 5-7 years, some last longer, some are shorter. The property is sold when the sponsor company accepts an offer to sell. Upon the sale, proceeds can be returned to the investor or sent to a Qualified Intermediary to invest in a subsequent 1031 transaction. Some people refer to the DST process as “swap till you drop”, meaning that you can continue to cycle through DST programs and defer taxes by completing 1031 exchanges until your death. At this point, your heirs inherit the property and receive a step up in basis to the most recent purchase price. A financial advisor from Whitestone Wealth management can guide you through the process in San Antonio.
- Inventory of deals readily available
- All financing is prearranged non-recourse debt
- Use of debt can add back basis
- Highly tax efficient income
Of course, as with any investment, there are limitations to consider, and a few for the DST are:
- Zero control over timing of sale
- Cannot re-write leases during DST
- Lower income