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Updated about 5 years ago on .
DST Round Trip with Defeasance Added To Debt - Added Risk?
I has just experienced my first DST round trip. The defeasance cost
caught me by surprise. The sale occurred at the end of year 5 causing
five years of early payoff penalty interest. The cost was added to our
debt and this grew our debt allocation by almost 9%. Now the next
rollover must include the higher loan to value ratio. If this keeps up,
one day an ill timed recession might wipe me out. I could go back and
take the defeasance as an expense that would lover my capital return
from 58% to 39%. If I rollover with the higher debt I increase my
monthly cash flow by 25%, but if I take out the fees as an expense
(reducing both my debt and equity) my increase in cash flow is only 5%.
Should I worry about the increase in debt and take the lower return or
is it safe to go forward with the proposed rollover?
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