Don Meredith, President of Tactical Income Inc., has a new book titled The DST Revolution: 1031 Exchange Into Retirement Mode, DST, and Philanthropy. This book is the 2nd Edition to his original book, The DST Revolution: 1031 Exchange Into Retirement Mode. This book is gaining the attention of experienced real estate investors who are looking to trade in their day-to-day management of income properties for a more passive investment portfolio that will free up more time and hopefully reduce some stress.
Steve Lander on Chron.com wrote “owning an apartment complex straddles the line between an investment and a career.” In The DST Revolution, author Don Meredith, who has been working with property owners for over 20 years, argues that for many income property investors approaching or at retirement, the “career” part of owning income property may no longer be as appealing as it once was. For many, a Delaware Statutory Trust for a 1031 exchange may be the solution.
What Is a DST and What Type of Properties Can It Include?
In his book, Don Meredith explains that Delaware Statutory Trusts (DSTs) are “armchair investments”, or a passive investment opportunity, that allows individuals to own fractional shares in institutional grade properties through a 1031 exchange. Examples of properties that have recently been structured into DSTs include:
- A large retail shopping center in California
- An office building in New York City
- A multi-family portfolio in Colorado
- A portfolio of multiple storage properties located in multiple states
A DST is a legal entity created as a trust under Delaware law that can hold real estate. However, as you can see from the examples above, Delaware Statutory Trusts aren’t required to be in the state of Delaware.
If properly structured, a DST will be classified as a grantor trust for federal income tax purposes and, as a result, the purchaser of a beneficial interest in the trust will acquire an undivided interest in the asset(s) held by the DST. Delaware Statutory Trusts are formed pursuant to private governing agreements under which a property or several properties are held, managed, administered, and/or operated for profit by a trustee for the benefit of the holders of the DST’s beneficial interests.
What Are Some of The Potential Benefits of DST Ownership?
In The DST Revolution, Don Meredith states that some of the potential benefits of DST ownership include:
- The potential for higher quality, investment-grade assets that are typically only available to
- Providing investors with current income.
- No management or day-to-day operation responsibilities.
- The debt is non-recourse, which means that in the event of a default, the DST investor is not
How Can a DST Help Real Estate Investors Retire?
Having worked with investment property owners for years, Don Meredith has seen many transformations from active property manager to passive investor. For many seasoned real estate investors, owning investment properties can eventually start to deplete their time and energy and interfere with fully immersing into retirement mode. Several of Don’s clients who have 1031 exchanged into DSTs have shared with him their stories of new pursuits that come with freeing up more time and letting go of some of the stress that comes with managing properties.
For others, listing and selling properties and executing a 1031 Exchange into a DST investment-grade property is simply a matter of taking advantage of a greatly appreciated property. Putting all that equity to work along with diversifying geographically and by asset class often also increases monthly income.
What Else To Know About DSTs
A Delaware Statutory Trust is an investment in real estate. As with any investment in real estate, a DST is subject to market value and rental income fluctuations, tenant issues, vacancies, taxes and governmental regulations. There are costs and fees associated with Delaware Statutory Trust investment and management and the tax benefits must be weighed against the investment costs. You can learn more about the potential benefits, risk and drawbacks of Delaware Statutory Trusts here.
Get The DST Revolution on Amazon
Don Meredith, author of The DST Revolution, 1031 Exchange Into Retirement Mode has been specializing in Delaware Statutory Trusts and 1031 Exchanges for over 20 years. You can purchase the book on Amazon in paperback or Kindle.
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