Welcome to the DST Bulletin

A Delaware Statutory Trust (DST) is a legal entity created as a trust under Delaware statutory law, which permits a very flexible approach to the design and operation of the entity. Investors in a Delaware Statutory Trust own a pro rata interest in the trust and have the right to receive distributions from the operation of the trust, either from rental income, or from the eventual sale of the property. 

Defined by SEC as an individual with a net worth (excluding primary residence) of $1,000,000+ or annual income in excess of $200,000 for last two years for an individual or $300,000 for a couple filing jointly.

Yes.As a co-ownership system, a DST investments allow investors to benefit from property investment gains without being responsible for management. With a Delaware Statutory Trust 1031 exchange, the trustee takes on the legal title and management responsibilities, while the investors serve as beneficiaries with the equitable title.  Through co-ownership, it’s possible to fractionally invest in larger properties, such as medical offices, industrial properties or multifamily apartment communities 

Not for DSTs, which unlike TICs, a significant advantage of Delaware Statutory Trusts (DSTs) is that the unanimous approval of the individual owners (investors) is not required in order to deal with unexpected, adverse developments. 

Yes, as long as you rent the property for more than 14 days per year for the first two years, and use it for personal use fewer than 14 days per year and no more than 10% of nights rented. 

There is not a specific amount of time that you must hold a property before using it in a 1031 exchange, but the IRS will look at your intent – you must have had the intention to use the property for investment purposes, which could include renting the property at a fair market value. 

Another advantage of Delaware Statutory Trusts is that the lender deals with the trust as the only borrower, making it easier and less expensive to obtain financing. This is in contrast to a TIC arrangement where the lender needs to approve up to 35 different borrowers. Because the loan is obtained by the trust, there is no need for the individual investors to be qualified and their participation in the trust does not affect their credit rating.

In a traditional 1031 exchange, you sell a property (known as the relinquished property) and then buy a new property of like kind (known as the replacement property for business use or investment purposes). A reverse 1031, the order is reserved, enabling you to acquire new property before you have sold your original property.  

You have 45 days to identify a new replacement property and 180 days to complete the exchange, or you might be liable for capital gains tax.

A personal residence, developed lots, home flipping, partnership interests or property held for resale immediately after acquisition. Second homes may or may not qualify depending upon the use and how it's reported for income tax purposes. 

Yes, we can assist investors in the United States, some additional license registrations may be necessary on our end but we take care of that if needed.

Delaware Statutory Trust investors enjoy limited liability to their personal assets due to the bankruptcy-remote provision of the DST. This means that even in the event that the trust fails and goes into bankruptcy, the most that investors would likely lose is their investment in the trust. Any potential creditors of the trust, or the lender, would be limited by provisions in the trust from reaching the other assets of the investors. Therefore, no LLC entity is necessary to hold a DST investment

Acquiring a DST property relieves investors of the responsibilities of sole ownership. Instead of being responsible for tenant complaints, facility issues and other considerations, DST investors are only responsible for contributing their share of the investment.

You just pay the capital gain taxes like your would have if you were to sell the property in the first place. 

No, Delaware Statutory Trust investors typically have no closing costs associated with the creation of a single-member LLC as in a TIC offering, saving as much as $5000 per investment.

A Delaware Statutory Trust also has a Delaware trustee (required by statute), so there is no worry that the trust will inadvertently terminate.

The signatory trustee of the Delaware Statutory Trust will generally be the sponsor of the private placement offering or one of its affiliates. Unlike a TIC deal, there is no one-year time limit on the trusteeship or the term of the property manager. This will give the lender comfort that the sponsor will have a continuing presence in operating the property.

Yes, most clients prefer diversification in both property types and geography.

To get a DST 1031 property, an investor must work with a Qualified Intermediary (QI) to handle the exchange. The stipulation is that a third party not affiliated with the seller or buyer must hold and transfer the money to complete the exchange. The investor cannot directly receive the money from the first property sale. 

No, it does not. Personal residences qualify for different tax benefits under IRS Code Section 121. Section 121 allows a taxpayer to exclude up to $250,000 ($500,000 for certain taxpayers who file a joint return) of the gain from the sale (or exchange) of property owned and used as a principal residence for at least two of the five years before the sale.  

A like-kind exchange occurs when you want to sell an asset and acquire a similar one, while avoiding capital gains tax. These are heavily monitored by the IRS and require oversight to ensure that no tax penalty is incurred.