4A — March 2023 — 1031 Exchange — Financial Digest — M id A tlantic Real Estate Journal
www.marej.com
1031 E xchange
By Dwight Kay, Kay Properties Four ways to use DSTs for your 1031 Exchange
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for a loan or even fill out loan documents, DSTs can create a reliable tool for you to access high-quality real estate invest - ments without having to jump through the hoops of getting approved for a loan. 2. Cover strategy. Another popular use of DST investments comes in the form of providing a cover strategy for left over equity. Let’s say you sell one property and can - not find a suitable replacement property that uses the full ex - change proceeds, and you now have leftover equity you need to place. One of the benefits DSTs can provide you in this situation is the ability to enter one without investing a lot of money. Because DSTs require a low minimum investment amount (typically $100k), they can be a good way for you to use any extra 1031 Exchange pro - ceeds to avoid having a “boot” to pay taxes on. Placing the leftover exchange proceeds into a DST property can potentially allow you to achieve full tax de - ferral for your 1031 exchange. Consult your own tax or legal advisor for tax and legal advice. An Example of How DSTs Can Provide Cover for a 1031 Exchange Here’s an example of how continued on page 14A
ey Highlights: ● DSTs can help inves - tors successfully com -
Exchange Investors in these four ways: 1. Debt Replacement 2. Cover Strategy 3. Diversification and Passive Investing 4. Back-Up Option If you are considering a 1031 Exchange, here are four ways you can use DSTs as a strategic tool for today’s challenging real estate market: 1. Debt Replacement. One of the most popular uses of DSTs for a 1031 Exchange involves not having to secure financing. For example, if you are in the midst of a 1031 Exchange in today’s unstable debt market, you may be hav - ing a difficult time finding a mortgage to satisfy your 1031 exchange requirements. DSTs, however, are designed to make it easy to invest in without hav- ing to deal with qualifying for and taking on a mortgage on own’s own. That’s why many investors find DSTs also make a suitable primary investment option for 1031 Exchanges. Kay Properties has a variety of leveraged DSTs that are pre- structured with non-recourse debt already built-in typically ranging from 30% to 70% of - fering loan to value (LTV). Because DSTs typically do not require you to have to qualify
plete a 1031 exchange ● DSTs can potentially provide in - vestors great - er diversifica - tion ● DSTs can help inves - tors replace
Dwight Kay
debt for their 1031 exchange ● DSTs can provide investors a back-up option for a 1031 exchange Regardless of what eco - nomic trends are taking place, Delaware Statutory Trusts provide investors a number timeless benefits for their 1031 Exchanges including deferring capital gains taxes, eliminating the headaches of active management (think the Three T’s: tenants, toilets, and trash), the ability to create a more diversified* portfolio, and provide investors the potential for consistent and durable income streams ** . Here are four specific ways real estate investors are utilizing DSTs for their 1031 exchanges. Delaware Statutory Trusts can be used by 1031
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