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Updated over 4 years ago,

User Stats

39
Posts
9
Votes
Jessica Singh
9
Votes |
39
Posts

DST - debt vs debt free

Jessica Singh
Posted

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!

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