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