delaware statutory trust

[Jey Berke]

Anyone have experience with Delaware Statutory Trusts (DSTs)? My mom is selling a large property and wants to do a 1031 into something that is more passive in nature. Are there any companies she should gravitate towards or avoid? Any pitfalls to consider? What are the typical fees she should expect, and what return on investment should she expect after all the fees are paid off?

I'd love to hear personal stories. Thank You.

[Matt W.]

While DSTs have matured somewhat from the recession market, my group has had multiple bad experiences from stopped cash flow, short sales, and foreclosures. You have no control and no say as an investor, the trustee can sell the property at any point without investor consent, and it is usually very fee intensive. I do think there is a place for DSTs in the market, and some do well, but you would be well served searching the horror stories that have occurred. 

We have invested with many now defunct providers and we also currently have a few assets with Inland and Passco. Both are huge companies, but we were turned off by Inland selling an asset 2 years into a 10 year hold for minimal appreciation, and not having a proper LTV deal to 1031 exchange into. They also generally require 40-50% down on apartments which are our preferred asset class. We have decided to focus on areas outside of California, source a good management company, and control our own destiny.

Buyer Beware