DST Advantages

Passive Management.

  • No day-to-day management responsibilities
  • Professional asset management
  • Limited personal liability
  • Packaged annual tax reporting

Real Estate Tax Benefits.

  • Step-up in basis for heirs
  • Depreciation
  • Deferral of capital gains and recapture liabilities

Diversification.

  • Geographic, property, tenant, sponsor
  • Institutionally sourced real estate
  • Staggered market entry due to cycle timing

In-Place Financing.

  • Intuitionally arranged terms
  • Typically non-recourse to the investor
  • LTV options to meet relinquished property criteria

Mitigated Identification Risk.

  • Properties owned, syndicated, and available for immediate exchange
  • Quicker deployment of exchange capital
  • Institutionally negotiated purchase price
  • Back-up identification

Remainder Equity.

  • Small minimum investments ($100,000)
  • Additional option should identified property fall through
  • Ability to deploy all exchange equity for full deferral

DST Risks

  • Beneficial owners possess limited control and rights. The trust will be operated and managed solely by the Trustee. Beneficial owners have no right to participate in the management of the trust.
  • Beneficial owners do not have legal title. Beneficial owners do not have the right to sell the property.

Real Estate Risk

  • Speculative market and financial risks associated with fluctuations in the real estate market.
  • Loss of principal.
  • Variations in occupancy may negatively impact cash flow.
  • Limited liquidity.
  • Limits on management control of property.
  • Changes in value of the underlying investments.

Seven Deadly Sins

  1. Once the offering is closed, no future contribution to the DST by current or new beneficial owners.
  2. Trustee cannot renegotiate the terms of existing loans or borrow new funds from any party.
  3. Trustee cannot reinvest the proceeds from the sale of its investment real estate. Proceeds must be distributed to beneficial owners.
  4. Trustee is limited to making capital expenditures with respect to the property for (a) normal repair and maintenance, (b) minor non-structural capital improvements, or (c) those required by law.
  5. Any cash held between distribution dates can only be invested in short-term debt obligations.
  6. All cash, other than necessary reserves, must be distributed on a current basis.
  7. Trustee cannot enter into new leases or renegotiate the current leases.