1031, DST and Alternatives
Sometimes, it can be beneficial to have access to “alternative” investments in a portfolio, but what is the difference between alternative investments and traditional investments?
Traditional investments are things like stocks, bonds, mutual funds and ETFs.Alternative investments can include private equity or venture capital funds, hedge funds, managed futures, art and antiques, commodities, private debt real estate and more. In the past, alternative investments traditionally were held by large institutional or accredited investors. Today however, alternative investments have become feasible and affordable for retail investors. One reason investors consider alternative investments is because many times, they are not correlated to the stock market and can produce a steady stream of income too. If you would like to know more about Alternative Investments that we have on our calendar, please give our office a call at (804) 741-4972.
Sometimes investors sell a piece of real estate but don’t want to realize all of the taxable consequences that result from that sale. A 1031 allows an investor, using IRS tax code 1031 to defer some or all of these taxes to a later date by a process where they swap the proceeds of the sale into another property. This can be a difficult process to accomplish on your own. That is why the 1031 industry exists, providing a ready supply of real estate, to swap to. If you have a piece of real estate that you are selling and wish to explore a 1031 opportunity, call out office at (804) 741-4972 to discuss what 1031 properties we have on our current calendar.
A Delaware Statutory Trust, or DST, is a real estate investment vehicle constructed under Delaware law. DSTs are professionally managed investments, seeking passive income, that cover a wide variety of property types, including multi-family apartment complexes, industrial buildings, self-storage facilities, commercial office buildings, and more.
In a DST, many investors pool their equity. Each investor owns their share of the trust, which in turn owns the property. Ownership in the DST is in proportion to the amount of equity investment of each investor. Investors are known as “beneficiaries” of the Trust. The IRS treats DST interests as direct property ownership, thus qualifying for a 1031 exchange as mentioned above
However, unlike direct property ownership, the DST structure shields investors from property-related liabilities.
Another thing that makes a DST different from a 1031 is that a sponsor “packages” the DST investment finding the property, performing due diligence, securing financing, acquiring the asset, and retaining management. At that point they begin offering interests to individual 1031investors. Each investor owns their proportionate share of equity in the DST and each investor is entitled to their proportionate share of any potential income produced by the DST.
The DST structure also protects individual beneficiaries from creditors who may want to place liens against the property, giving greater security to lenders and other beneficiaries.
If you have interest in finding out more about DSTs, including the risks as well as the benefits, please give our office a call to discuss the current DST programs we currently have access to. (804) 741-4972.
Serving clients in Amelia county, Chesterfield County, Goochland County, Hanover County, Henrico County, Louisa County, New Kent County, Powhatan County, Ashland, Charlottesville, Mechanicsville, City of Richmond, City of Petersburg, Colonial Heights, Newport News, Tappahannock, James City County, Williamsburg and more..