Investments in DST may provide Financial Stress Relief

Al DiNicola DST Investments, LLC -Registered Investment Advisors

January 2020

Are you stressed out owning rental property?  The day you acquire the rental property no matter the size you may be excited about the possibilities of profit and cash flow.

Owning rental property and maintaining that property could be time intensive especially if you are actively involved.  There are many jokes about the 3 T’s (tenants, toilets & trash). Adding to that stress may be the taxes on the property, capital upkeep and general concern for an exit strategy. Add to that the stress with the relationship between you and the tenant or you and the management company.

The solution may just be discovering ownership is a DST.  This could be a very different experience.  The day to day concerns about the property and relationships between the various participants is eliminated. Some property owner may have “management withdrawal” because they are not constantly on call.  However, the investors who have owned traditional rental suddenly have a new sense of freedom when they move from active management into the DST ownership. Simply put there is personal freedom as well as a clear direction to financial freedom.   Stress relief knocking at your door. Many DSTs have provided a clear exit for those seeking an IRC 1031 Tax deferred exchange. However, cash investors are now turning to DSTs for financial relief. Once investors move from a typical commercial or residential rental property style of ownership into a DST ownership there will be free time to focus on other personal and financial goals. When calculating the value of one’s personal time the DST may provide increased cash flow. Overall returns may also be better with the understand that DST have a life cycle or holding period.    Moving into any investment must be structured with economic sense and have the proper support team around to deal with management of the property.  DST have professional management supervision and many

management companies have goals to care for the property, increase income, oversee and decrease expenses and maintain the property for the DST exit strategy.

Investor can expect to receive monthly income (sent via direct deposit) from the revenues obtained from the properties. Sponsors provide the asset classes to invest in providing a variety of options from all commercial assets. The assets are prepackaged and may fit any investor size (typically starting at $100,000) Investors receive regular reports on the property either from the Sponsors or their investment Adviser. There are annual reports prepared for your accountant or CPA to claim the income, deduction and other applicable information.

There are also opportunities for diversification which may also reduce stress. You may invest in a variety of locations and offset potential risk. Diversification does not always avoid risk so each investor should seek assistance with their decision.  Although when properties are all located in one area and that area is affected by a natural disaster or other demographic shift that may be of concern.  May investors have sleepless nights thinking about the worst-case scenarios.  These concerns may be avoided with a DST offering properties in a variety of location to spread the risk. You may invest in a multi-family property in Texas, and office building in Denver and a Senior living facility in Arizona.

The DSTs are not to be considered a “flipper market” or an asset that has a “call my broker and get me out” solution. However, time is on the side of DSTs.  These are long term investments typically 7 years + (although some may be shorter).  The response we receive once the investors selected the DST is one of relief of the stress of ownership.  The Managers take care of the property.  Sponsors continue to seek to increase value of the property through rent increases as the sponsors prepare to the exit sale at a prescribed period of time.

A word to the wise, All real estate investments carry certain risks including liquidity, interest rate and management.  DSTs are considered real estate and carry these risks. DST are for Accredited Investors.

For more information on how to properly set up an IRC 1031 Tax Deferred Exchange or if you are an accredited investor and would like additional information on a DST contact Al DiNicola at 239-691-8098

Al DiNicola

About the author

Al DiNicola, AIF, CEPA, specializes in 1031 Exchanges utilizing DST as a viable alternative for accredited investors. He also is well versed in Opportunity Zones and Alternative Real Estate Investments. Mr. DiNicola has more than 40 years of experience in commercial & residential sales and development. Al has extensive experience in real estate land acquisitions, development, investment and real estate securities.

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