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Updated over 4 years ago,
DST - debt vs debt free
Assuming I no debt on my incoming gains from selling a rental property, what are the advantages of opting for DSTs with almost 50% LTV vs debt free DST?
A. If we take say 50% LTV, what happens after 10 years when DST comes to term? Won't I now have a debt that will need to be carried forward into the next exchange?
B. If we take a debt-free DST. After 10 years, I won't have any debt to carry forward.
Can anyone help by giving an example with what happens to 100K cash (debt-free) available for 1031, to be invested in a DST with COC 5%. in DST-A vs DST-B
As I understand, for 10 years, both DSTs will give $5000/year. Also, will this interest income be tax-free in both DSTs. Is that a simple answer, if not, ignore this question.
What happens if both DSTs get sold for 200k. Does debt play any role in how much money I get to reinvest?
I am asking this due to my preconceived notion that debt is always bad. Please educate me if my understanding is wrong. Ready to learn. Thank you!