The DST which is also known as Delaware Statutory Trust 1031 is, as its name suggests, the legal entity that is well created as the trust under the state law of Delaware. However, DST is also well created for the purpose of real estate investment, and it is particularly useful in the 1031 exchange. Under the DST, investors every own the share of pro rata of DST. The DST also in turn even holds the title to different interest of real estate, and also distributes any kind of income received through properties to investors in the well proportion to the ownership share in DST.
On the other hand DST, through their signatory trustee, also makes all the decisions that are well related to any kind of property that is usually held by trust, freeing the investors from the level of responsibility. One significant thing that you should note about the dst investment is that trust is usually not considered as the taxable entity, hence any kind of the profits as well as losses are usually passed through to investors of trust.
When it is about the 1031 exchanges, IRS has also identified that any kind of the beneficial interest in DST is usually treated as the most identical to the direct interest that is available in the real estate. It means that the properties of the DST-held are completely qualify for the 1031 exchanges, till the time of the other requirements for exchange are even met.
For investors that are not looking for responsibility of the day-to-day decision-making and management authority that are related to the holdings of real estate holdings, the DST may also be an awesome choice.
Advantages of DST
The key reasons investors get highly interested in buying the interest in the DST is mainly benefit to own the securitized real estate. On the other hand, the DST offers other kind of the benefits to the investors.
Removes requirement of Unanimous Approval
Unlike the TIC or Tenancy-In-Common structure of ownership, the DST does not need unanimous approval for all investors for making decisions that are usually related withheld real estate. Like for instance, should economic environment need quick sale of the parcel of the real estate that is held by DST, the entire authority of decision-making to the list or even sell property lies with signatory trustee of DST instead of investors.
Limited Liability of Personal
For the reason of provision of "bankruptcy-remote" of DST, the individual investors enjoy the limited kind of liability with the personal assets. It should be fail of DST and might even enter bankruptcy, most at the high risk for any kind of the individual investor in their investment in trust. However, Creditors of trust are also limited from the one that are from reaching any other kind of the assets of the investor.
For the purposes of the financing buying by DST, lenders usually treat DST as the single borrower. It makes financing to be simpler and easier and even less expensive for procure obtain.