DST.EDU Series A Part 1: Depth & Breath of knowledge for Investors about DSTs

Delaware Statu­to­ry Trusts (DSTs)

It has been two years since we first pub­lished a series of edu­ca­tion­al arti­cles on Delaware Statu­to­ry Trust (DST) invest­ing and uti­liz­ing a Sec­tion 1031 tax deferred exchange.  There have been a lot of mar­ket changes over the past two years and by request we are updat­ing our edu­ca­tion­al series called DST.EDU!

Jan­u­ary 10, 2024, Updat­ed
Orig­i­nal­ly post­ed Feb 1, 2022

By Al DiNi­co­la, AIF®, CEPA™
DST 1031 Spe­cial­ist
NAMCOA® — Naples Asset Man­age­ment Com­pa­ny®, LLC
Secu­ri­ties offered through MSC-BD, LLC

Wel­come DST News! Our goal is to pro­vide non-biased edu­ca­tion and mar­ket infor­ma­tion for Accred­it­ed Investors on DSTs.

Real estate Invest­ing has pro­vid­ed many advan­tages for investors. Access to cap­i­tal (abil­i­ty to bor­row) may lim­it investors in acquir­ing high­er qual­i­ty real estate.  For some investors access to debt may be restrict­ed thus lim­it­ing the size of the invest­ment. Using debt or lever­age may increase risk (default or fore­clo­sure) but has been proven to increase poten­tial returns.  When you com­bined the real estate acqui­si­tion with tax advan­tages such defer­ring cap­i­tal gains and depre­ci­a­tion on the struc­ture (land not depre­cia­ble) investors may expe­ri­ence tax ben­e­fits as well as ben­e­fit from the appre­ci­a­tion in the val­ue of the real estate. To pro­tect those ben­e­fits and poten­tial­ly build wealth many investors will research and uti­lize IRC §1031 tax deferred exchange (like-kind exchanges). This invest­ment strat­e­gy has pro­vid­ed a wealth build­ing tool for investors. Since the orig­i­nal post­ing of this edu­ca­tion­al series lend­ing inter­est rates have increased plac­ing pres­sure on the abil­i­ty to obtain financ­ing as well as the pres­sure on net oper­at­ing income (NOI). Since Feb­ru­ary 2022 res­i­den­tial rental rates as well as res­i­den­tial pric­ing have risen. How­ev­er, the same under­ly­ing con­di­tions exist for uti­liz­ing a §1031 asso­ci­at­ed with real estate invest­ing.

There is a very defined set of §1031 rules that may be com­pli­cat­ed. The rules are at times con­fus­ing even for expe­ri­enced investors. The best advice for investors seek­ing to uti­lize a strat­e­gy that uti­lizes the IRC code is to seek a com­pe­tent tax pro­fes­sion­al or account­ing pro­fes­sion­al. The team should include your CPA, a Qual­i­fied inter­me­di­ary (QI) and a finan­cial advi­sor who is well versed in 1031 as well as poten­tial alter­na­tive invest­ments includ­ing DSTs. Sec­tion 1031 of the IRC has been around for over one hun­dred years. There have been some changes over that peri­od of time. Uti­liz­ing a DST to suc­cess­ful­ly per­form an exchange does com­ply with the require­ments and intri­ca­cies of the IRS code. DSTs were approved as an accept­able replace­ment prop­er­ty in 2004.

The scope of the infor­ma­tion pro­vid­ed here may serve as a dive into the advan­tages and poten­tial draw­backs of Delaware Statu­to­ry Trusts. This invest­ment strat­e­gy may help man­age and defer tax lia­bil­i­ties and pur­chase inter­ests (frac­tion­al inter­est) in com­mer­cial-grade real estate. In most cas­es these acqui­si­tions would sim­ply be out­side many investors’ capac­i­ties.

Over the past two years there have been some exten­sions to the IRC §1031 rules. Most of the exten­sions was grant­ed to tax­pay­ers in Cal­i­for­nia that were affect­ed by floods. In the past hur­ri­cane vic­tims in Flori­da and oth­er states may also have been grant­ed exten­sions.

Look for Part 2: Delaware Statu­to­ry Trust- What is a DST and why you should or may con­sid­er.

DST’s (Delaware Statu­to­ry Trusts) are for accred­it­ed investors only.  Con­tact your invest­ment advis­er for addi­tion­al details on how a DST may be a solu­tion to your 1031 Exchange and com­pli­ment your finan­cial objec­tives. 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 or email adinicola@namcoa.com.

This is not an offer to pur­chase or solic­i­ta­tion to pur­chase any secu­ri­ty, as such be made only through an offer­ing mem­o­ran­dum or prospec­tus. Invest­ing in secu­ri­ties, real estate, or any invest­ment, in any form, involves risk, includ­ing but not lim­it­ed to the poten­tial of los­ing some or all of your invest­ment dol­lars when you invest in secu­ri­ties. You should review any planned finan­cial trans­ac­tions that may have tax or legal impli­ca­tions with your per­son­al tax or legal advi­sor.    NAMCOA, LLC is a Reg­is­tered Invest­ment Advi­sor, reg­u­lat­ed by SEC (Secu­ri­ties and Exchange Com­mis­sion).  Our cor­po­rate office is locat­ed at 999 Van­der­bilt Beach Road,  Suite 200, Naples  Flori­da 34108. Secu­ri­ties Offered through MSC-BD, LLC, Mem­ber of FINRA/SIPC. 8215 SW Tualatin ‑Sher­wood Rd, Suite 200 Tualatin, OR 97062. MSC-BD, LLC and NAMCOA are inde­pen­dent­ly owned and are not affil­i­at­ed.