A DST can eliminate all taxes when you sell your investment property.

1. Tax efficiency. DSTs can help investors defer capital gains taxes and reduce or even eliminate all the taxes owed from selling their investment property. The new income you receive from your DST will allow for depreciation benefits, which may allow all or some of your income from the DST to be tax-free.
2. Built-in leverage. Some DSTs have built-in nonrecourse loans, which are loans against your investment property, not personal loans where a bank can come after you. These built-in loans allow you to complete a successful 1031 exchange since part of the requirement of the exchange is that if the loan is paid off during your sale, a new loan of equal or greater value is needed; otherwise, the investor has to come out with out of pocket cash. For landlords who have no loan and have completely depreciated their investment property, this new leverage allows them to buy additional real estate, which provides for new depreciation, which means you can start collecting tax breaks again from the new DST rental income.
3. Diversification. When you sell your investment property to purchase a DST, you are reducing your concentration risk, which could have consisted of just one tenant, into several or even hundreds of different properties in many states. If you have a few tenants who have continued to pay rent for many years, consider yourself lucky since someone else's problem can become your problem; for example, a job loss or medical condition might cause your most significant investment to stop paying income with added legal and repair costs over a multi-year eviction. You wouldn’t put all of your net worth into one stock, so why would you risk it all on one building? A DST can be part of a diversified portfolio and mitigate this risk through diversification.
4. Increased cash flow: By deferring taxes, investors can retain more cash for re-investment or other purposes. In some cases, you will get more income through a DST than your own rental property!!! One of the biggest mistakes Marc Alan Wealth Management has seen is an investor selling their investment property, paying the taxes, and reinvesting the net proceeds in investments such as CDs and Municipal bonds, which eliminates future growth and creates taxable income. With a DST, you won’t lose up to a 1/3rd of your value to taxes, which means you will have a larger account value to generate tax-efficient yield and maintain future nontaxable appreciation in real estate.
5. Contained risks. Don’t expect costly repairs or capital calls (risk is typically limited to within the trust). You do not even have to hold these investments in an LLC; the DST limits your liability to the initial investment.
6. Flexibility. DSTs can shelter gains from various real estate investments. You don’t have to stay with a multifamily investment just because you started with one; you can mix it up with self-storage, grocery, medical, and senior living for some recession resistance! If you own farmland, it's possible to 1031 exchange it for student housing, self-storage, or a mix of other investment properties.
7. Great for your estate. Once you purchase shares in these types of properties, you retain the ability to gift these assets, which may help improve your estate's portability. Also, if you pass away, these qualify for a step-up in basis, so your heirs could inherit them all tax-free.

When do I pay the delayed tax bill?

It depends on the type of DST you purchase.  In most cases, if you avoid taxes by purchasing a DST, you can continue to defer taxes by doing a 1031 Exchange every several years when the DST ends.  In other cases, you can opt for a permanent solution that does not require future 1031 exchanges, and taxes are avoided as long as you do not sell the product. In most cases, taxes are owed once you receive your funds, but there is one exception. Learn more about the types of DSTs>>

Is there a way to never pay the taxes?

Yes, there are two strategies: one is called swap until you drop, and another is to set it and forget it. Contact us for additional details>>

What are the disadvantages of owning a DST?  Read about it here>>

>>Send us a message today to learn more about how we can help you achieve your financial goals.