Diversifying your real estate portfolio is a key to sound investing. A great avenue to accomplish this is to invest in real estate via an entity known as a Delaware Statutory Trust ("DST"). DSTs allow for fractionalized ownership of large and/or multiple properties, and properly structured DST investments will qualify as 1031 exchange replacement property. With low minimum equity requirements (e.g. $100,000) you can invest in multiple institutional grade properties with professional management in place. In addition, it provides you with the choice of different locations, various property types, tenants, industries, etc.
And since DST investments come with financing already in place, they offer greater ease in the identification, acquisition, financing and closing compared to other real estate transactions.
Some advantages to investing in real estate via DSTs as compared to direct fee title real estate are as follows:
- Higher quality properties than you could afford on your own
- Pre-arranged and non-recourse financing (no guarantees, no personal liability)
- No management responsibilities (frees up your time)
- Generally more consistent cash flow paid monthly
- Easier to more fully diversify your real estate portfolio
- Ability to take advantage of the §1031 tax deferred exchange again in the future.
Principal disadvantages of DST investing are:
- Not everybody is eligible to make these investments (you must qualify as an "accredited investor")
- You will not control the timing of sale of the property, and
- Larger up front costs to absorb.
