10A — August 10 - 23, 2018 — §1031 Exchange — Financial Digest — M id A tlantic

Real Estate Journal


1031 E xchange

By Edward Fernandez, 1031 Crowdfunding, LLC 8 reasons to consider a DST for your 1031 Exchange


Delaware Statuto- ry Trust (DST) is a separate legal entity

repairs or faces unexpected expenses. However, all earn- ings and proceeds above the reserve amounts must be dis- tributed to the beneficiaries on a regular basis and within the expected timeframe. 5. Investors do not have to qualify for the debt. Investors do not have to quali- fy for the property’s mortgage loan. The DST is the only entity liable for the mortgage loan and it is nonrecourse to the investor. Investors do not have to provide personal docu- mentation for loan approval and do not have to worry about other personal assets or liabilities affecting the status of the loan. 6. No stress over exchange deadlines. Because an investment in a DST can close very quickly, investors do not have to worry that the acquisition transac- tion won’t close on time or that they won’t be able to acquire a chosen property because of the competition in the market. 7. Eliminate boot. When a replacement property is lesser in value than the previously sold property, the remaining money must be taxed. This leftover money is known as excess boot. With a DST you can invest down to the penny, ensuring that 100% of your exchange funds are invested. 8. 1031 exchange backup plan. 1031 exchange investors can include a DST property among their three candidate properties identified during their identification period. If they cannot acquire their first two choices of identified can- didate properties in time to meet their deadlines, the DST property remains an option that can close very quickly to meet the exchange deadline. 1031 Crowdfunding, LLC is an online marketplace where real estate investors can find, view, and purchase a variety of available, turn-key, invest- ment-grade properties. We present investors with 1031 exchange-qualified properties through Delaware Statutory Trusts (DSTs) to ensure every 1031 exchange investor has the opportunity to complete a successful exchange. Edwa r d Fe rnande z is founder/CEO of 1031 Crowdfunding, LLC based in Orange County, CA. 

is treated as a direct interest in real estate, you are as- signed fractional ownership of equity and debt, fulfilling your exchange requirements. Minimum investments are typically between $25,000 and $100,000; therefore, a single investor may own a fractional interest in a single property or entire portfolio and receive distributions from the opera- tion of the trust, from rental income and the eventual sale of the assets. Here are 8 reasons why we keep talking about DSTs. 1. No management respon-

investors to acquire partial ownership and experience the benefits only found with these types of properties. 3. Opportunities for diver- sification. Because you can choose the amount you invest in a DST, you can split your investment among multiple DST proper- ties, giving you an opportunity to diversify your real estate portfolio. 4. Regular distributions. DSTs are permitted to keep a reasonable amount of cash reserves to be prepared in the event the property requires

sibilities for you. If you’ve owned rental real estate in the past, you know that property management is time-consuming and stressful. Some investors find that it can be a major relief to hand over the management and the decision-making responsibili- ties to a professional team of experienced managers. 2. Acquire investment-grade, high-value properties. Most real estate investors cannot afford to invest in multi-million-dollar proper- ties on their own. DSTs pro- vide a unique opportunity for

created as a trust under D e l a w a r e S t a t u t o r y Law. A DST al l ows you to co-invest wi th other investors in one or nu-

Edward Fernandez

merous properties. Although DSTs aren’t new, current tax laws have made them popular among 1031 exchange inves- tors. Purchasing into a DST

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