Delaware Statutory Trust (DST) Investing and 1031 Exchange

[Bradley Reber]

Hi,

I'm a part time buy and hold investor, currently selling an investment home in California and looking to perform a 1031 exchange. I recently learned of DST's and have done some preliminary research but can't find any comments from investors on BP's with experience in them. I generally know how they work and have spoken with an advisor about them, but are there any INVESTORS out there who can let me know their experience with these DST's, positive or negative? After investing in DST's, would you do it again? The alternative for me would likely be to invest in a multi-family residential property or a couple SFH's.

Thanks!

[Dave Foster]

@Bradley Reber, You'll find in general that your return is almost always lower with a DST than with a fully owned hard asset. This is the "passive tax" applied by the syndicator. The DST is sometimes considered "safer" because you are spreading the risk over a larger number of investors and the tenant/end user of the syndicated property are typically larger national credit companies. There is also the notion that DSTs are superior because of the cachet of being limited to accredited investors. I've not seen that play out. In my mind the most secure asset you can own is one that you yourself fully own and have deed to. But there absolutely is a place for a fractional 1031able asset that can provide you with both the tax deferral and dependable return.

There are other 1031 qualifying assets that would work as well. TICs present a somewhat similar structure to a DST with fewer investors, smaller assets and a return that is generally (not always) superior to a DST. NNN leases are probably the next rung above that towards individual ownership. Again, fewer investors, more recourse, superior returns.