Some challenges and drawbacks include:

Fees: 

DSTs often come with significant fees, which can eat into investment returns. Unfortunately, most of these products are sold by brokers with a substantial commission. The upfront charges may be as high as 10% or higher. If you keep flipping these investments with a broker, the fees can add up, and worse yet, the DST sponsors, the creators of these products, are also not fiduciary, so more often, these costs are hidden in the product and not realized until it is sold years later. Marc Alan WM is not a broker and aims to act in your best interest by being your Fiduciary. This means that all commissions from selling the product to you get refunded back into the product, which often results in the value of your DST immediately increasing beyond what you purchased. In other words, your $100k investment might become $104k or even higher. Marc Alan Wealth Management can only collect compensation directly from you, which dramatically reduces the costs of this product but might even reduce risks since we are not incentivized to sell you a highly commissioned product that may not be appropriate.

Complexity: 

DSTs require specialized knowledge and expertise to set up and manage. You can’t purchase these products without a broker. You need an experienced agent to navigate the complexities. It’s even better to buy these from fee-only agents to mitigate the conflicts of interest created by a commission.

Risk:

Investors may be exposed to increased risk due to the complexity of DSTs and their complete lack of control over the underlying property. Management decisions on increasing rent or selling the property are outside your control. DSTs are identified as speculative investments, but it's also speculative to directly own and manage your own investment property. If the tenant stops paying rent and you must evict the tenant, you are in trouble. Diversification from owning several properties in a DST can minimize this risk.

Aside from diversification risk, DSTs have liquidity risks. You can not directly sell your investment, but you have an expected time frame for when management will sell the investment property and send the proceeds back to you. Depending on the type of DST you buy, you might be able to receive your funds as early as 3 years or as late as 20 years. In the meantime, most DSTs are expected to pay ongoing income payments from their rent collected.

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

How we help reduce the challenges and costs of Delaware Statutory Trusts.

At Marc Alan Wealth Management, we understand the challenges and cons associated with DSTs. That's why we've developed a unique approach to reducing the cost and complexity of DSTs. By working directly with investors, we can:

Reduce fees

We can refund the DST provider seller commissions to you. By reducing fees, your returns will be higher. When you purchase a DST, it's likely you will purchase another DST in the future to keep the tax deferral. When you pay a large commission multiple times over your lifetime, it may substantially eat into your return.

Simplify the process

We work with most DST sponsors (creators) and can help set up your DST purchase quickly and smoothly.

Align our interests and create a win-win scenario.

As a fee-only advisor, we don't receive commissions from DST providers, ensuring our interests align with our clients. We can only receive compensation from you, not the sponsor of an investment company. When working with DSTs, it's essential to be aware of the potential risks associated with brokers. Brokers often have an incentive to push products that pay the highest commission, which may not be in the investor's best interest. At Marc Alan Wealth Management, we're not brokers and can't receive commissions from DST providers. 

Delaware Statutory Trusts offer a powerful tool for real estate investors seeking to mitigate taxes and simplify their investments. While DSTs have some challenges and cons, their benefits can be significant. By working with a trusted advisor like Marc Alan Wealth Management, investors can reduce the cost and complexity of DSTs, align their interests with their advisors' interests, and avoid the risks associated with brokers. Contact us today>> to learn how DSTs can help you achieve your real estate investment goals.

What are the different kinds of Delaware Statutory Trusts? >>Read our different kinds of DSTs blog

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