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Investing in Delaware Statutory Trusts (DSTs) offer a range of benefits, especially for investors seeking passive real estate investment opportunities.
Here are the key benefits of investing in DSTs:
Passive Income Stream
DSTs offer investors a passive investment structure. Property management, leasing, and other operational responsibilities are handled by the sponsor or management company, allowing investors to potentially enjoy regular income distributions without day-to-day involvement. Unlike owning rental properties directly, where landlords must handle tenant issues, maintenance, and other operational duties, DSTs relieve investors of these burdens, allowing them to focus on other priorities.
1031 Exchange Eligibility
One of the most attractive features of DSTs is their eligibility for 1031 exchanges, a tax-deferral strategy for reinvesting proceeds from the sale of real estate into another property. By investing in a DST, investors can potentially defer capital gains taxes while diversifying into high-quality properties.
Diversification & Access to Institutional-Grade Assets
DSTs provide access to professionally managed properties across different markets and asset classes, potentially reducing risk through diversification. Investors can spread their capital across multiple DSTs, further enhancing their diversification strategy. Not only that, but DSTs also allow investors to own fractional shares in institutional-grade real estate, which typically would be inaccessible for direct purchase by individual investors.
Predictable Cash Flow
DSTs have the potential to offer consistent, predictable income distributions, sometimes derived from long-term leases and investment grade tenants. This can provide a reliable source of passive income, particularly appealing to retirees or income-focused investors.
Risk Mitigation
As beneficiaries of the trust, DST investors enjoy limited liability, meaning their personal assets are protected, and their risk is confined to the capital they’ve invested in the trust. Furthermore, DSTs often have lower minimum investment amounts compared to direct real estate ownership. This makes it easier for investors to enter the real estate market without the need for substantial upfront capital, which can reduce their overall risk.
DSTs provide a unique opportunity for real estate investors to enjoy tax advantages, diversification, and passive income without the headaches of direct property ownership. They’re particularly appealing for those looking to defer taxes through a 1031 exchange, diversify their portfolio, or transition into a hands-off investment strategy.
At Keystone, we construct portfolios from the ground up by focusing on the opportunities and risks of each property, and we do so across real estate asset classes. We select properties that are in markets that we believe are strong and expected to continue to flourish and are occupied under long-term leases by credit-rated nationally recognized brand tenants (such as FedEx) with a proven history of success through market cycles and changing economic conditions; and target the objectives of our investors for income generation, asset protection, or both.
Learn more about our process and our portfolio here or schedule a call with us if you are interested in learning more.