“You don’t stop laughing when you grow old, you grow old when you stop laughing.” ~George Bernard Shaw

Delaware Statutory Trusts (DST), are a vehicle which many income property owners have used to exchange their buildings, which they are currently managing. This allows them to exchange to an investment in a property, usually larger, where they are part of a group investment.

WHAT IS A DELAWARE STATUTORY TRUST? These are legally recognized trusts which are set up for a business purpose. They have been around since 1947 and can be conducted in any state. Since we are talking about real estate investments, the property or properties can be in any state as well. In a 2004 decision, the IRS said that these types of investments can be part of a 1031 exchange. Investors are able to perform a 1031 exchange into a DST and defer capital gains similar to exchanging into another privately held piece of real estate. We are real estate brokers not accountants or attorneys so you need to bring in your tax and legal professionals before moving forward. Obviously, before you consider such an investment, you should first check with your CPA and your real estate attorney to make sure that it is a good move for you.

WOULD THIS BE GOOD FOR ME? It may be. If you are an accredited investor, with a net worth over 1million dollars and you are looking to be less “hands on” without paying capital gains taxes that you may accrue under a regular sale. If you are disabled, or just want to travel and be more carefree, this may be a good way to go. Remember, this is an illiquid investment and may be difficult to sell if you end up needing cash right away. Most of these investments are set up to go 3 -10 years until the property is sold and the proceeds are distributed. At that point, you can choose to cash out and pay any capital gains or reinvest into another DST

FINDING A GOOD COMPANY. There are many companies involved in promoting DST’s. As with anything similar, this is a major investment. You should look around. How long have they been in business? What is their track record? What types of properties do they work with? You should involve your CPA and your real estate attorney in the search. Do you have any friends or relatives who have invested in DST’s? It is very important that you choose a honest and experienced provider with a good track record.

DST’s may or may not be a good option for you. As an accredited investor, looking to slow down a bit, it may at least be something to look at. Consider the cons, such as lack of control of the investment and illiquidity as well as the pros, before you decide if it is right for you.

 

“Wisdom is always an overmatch for strength. ” Phil Jackson

What we at PRS PROPERTIES CAN DO. We are always available to chat. We can give you referrals for professionals, such as lenders, contractors, and engineers, so that you can decide who you feel best with. We can supply you with rent and sale comparables in the area of your properties, so that you know what rental values are in your area. It is important that you know the true value of your rental units, so that you can get them rented right away at market value, or at least as much as possible with rent control restrictions. We can look at potential purchases that you may be interested in to make the property more desirable, and maybe look at potential issues that an insurer might require you to repair.

If you should decide to sell your building, we can help you exchange into a larger or smaller properties. We can even help you move into something with less management responsibilities. We can also help with getting the paperwork together for a refinance if that is your desire. We can also recommend experienced licensed contractors who can perform any repairs or installations you may need prior to selling. We can also look at your building for other easy and inexpensive changes that might allow you to get a higher value. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.

We always have many investors who are looking for “as-is” properties and are willing to purchase with low rents, deferred maintenance or even with a problem tenant in place. We have put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are currently in 1031 exchanges and need to identify a replacement property before their 45 day identification period runs out.

Should you decide to put your property on the market, we will put together an aggressive, targeted and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.