Real Estate Agent · Oakland, CA · Member since 2021 · 34 posts · 15 votes
I was just perusing the DST posts, hoping they were a "silver bullet" for solid returns for older rental property sellers. They seem potentially expensive, confusing, inflexible and...maybe lucrative?
While I know an accountant would need to figure out on a case by case what makes sense, I wondered if for say 80-something year olds (in the $ SF Bay Area) paying taxes and having more liquid investments might make sense.
Is it possible some DST fees add up to what paying taxes on a sale would?
Curious to hear opinions and experiences of what you might do or have heard of older investors doing.
Great question. "Potentially expensive, confusing, inflexible...." the answer is yes to all of these! However, for the majority of DST deals, from the largest sponsors, there are solid returns and cashflow historically. On fees, DSTs are expensive, but far less than what you would pay in tax on a highly depreciated asset. Working with a registered investment adviser instead of a financial broker helps reduce the cost.
There are certainly bad deals in the marketplace and assets that have been overpaid for. Its important to do due diligence and avoid these deals.
There are other passive options like opportunity zones, tenant in common structures or GP/LP syndications. The GP/LP syndication isn't 1031 eligible, however those deals could kick off enough year one losses to offset gains.
Hope this helps a bit. No silver bullets, but options that could fit.