Are Your Rental Properties Weighing You Down? DST Real Estate Gives You Back Your Time

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    DST Real Estate Gives You Back Your Time

    Meet Jack. He’s a 58-year-old engineer living in Los Angeles who owns four residential rental properties. Jack manages them himself, but lately, it’s been exhausting. As he plans for retirement, he realizes his time might be better spent off the highway traveling between his properties and focusing on the next chapter of his life. Jack enjoys the extra income from his properties but wonders if the workload is too much. Additionally, he worries about a hefty capital gains tax bill when he sells.

    Solving the Capital Gains Tax Issue

    The solution to the capital gains tax issue is straightforward. With a 1031 Exchange DST, you can sell your investment property, following specific IRS guidelines, and then purchase another investment property to replace it. You can perform a full exchange or take out some cash from the sale. You only pay capital gains tax on the amount you take out, known as “boot.”

    Jack is not alone. Many property owners earn income from residential rentals but must deal with daily tenant issues, maintenance, and taxes. There is a smarter way to invest in real estate that is completely hands-off. Welcome to the world of institutional investing in syndicated DST real estate.

    What is Institutional Investing?

    Institutional investing is a concept where individuals invest at the same level as pension funds, Real Estate Investment Trusts (REITs), foundations, college endowments, and insurance companies. These institutions typically invest in large-scale projects rather than single-family homes or apartments. Accredited investors can access similar investments by pooling their resources to invest in properties worth $20 million to over $100 million, known as syndicated real estate.

    Who Qualifies as an Accredited Investor?

    An accredited investor is defined by the SEC as someone who:

    • Has a net worth of at least $1 million (excluding their primary residence), OR
    • Has had an income of at least $200,000 each year for the past two years ($300,000 combined with a spouse, if married) with the expectation of making the same amount or more in the current year.

    Only 8.5 percent of the population qualifies as accredited investors. If you are one of them, institutional investing might provide a great opportunity, leaving you more time to do what you love.

    How DST Investments Work

    Firms known as “Sponsors” acquire institutional-grade property, secure financing, package it into a Delaware Statutory Trust (DST) legal structure, and offer it as an investment to accredited investors. The Sponsors manage the property until its ultimate sale. In institutional investing, the Sponsor does all the heavy lifting, even though you own the property. These investments typically are held for five to seven years, accumulating cash flow, loan principal paydown, and property appreciation without the hassles of property management.

    Navigating DST 1031 Investments

    Here are a few pointers as you navigate DST 1031 properties:

    1. Choose Your Sponsors Carefully: Before committing, ensure the sponsor has a stellar performance record. Good Sponsors typically have a diverse portfolio and select high-quality, newer buildings with top amenities and low vacancy rates.
    2. Syndicated Investing: Syndicated investing alleviates the burden of property management while potentially offering higher cash flow. Like hiring a financial planner, investing in syndicated real estate means professionals handle the work for you. DSTs allow you to transition from smaller residential investments to institutional-grade properties, partnering with seasoned professionals and leveraging economies of scale.
    3. Work with an Experienced Investment Consultant: It’s crucial to work with an investment consultant or registered representative experienced in handling syndicated investments. Although DSTs are securities, they are fundamentally real estate, and real estate expertise is paramount.

    Your Time is Valuable

    Perhaps you’re like Jack. You’ve worked hard for your money, spent countless hours choosing the right investments, and devoted significant time to managing your rental properties. As retirement approaches, your investments should be doing the heavy lifting, not you. Your time, health, and sanity are invaluable. You owe it to yourself to explore opportunities that provide more time, potentially more money, and greater freedom. Make your retirement the best it can be with DST 1031 properties and enjoy the benefits of a hands-off investment approach.

    By considering 1031 DST listings and exploring DST properties for sale, you can optimize your real estate portfolio, defer capital gains taxes, and achieve a more fulfilling and stress-free retirement.