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Do’s and Don’ts of DST investments for your family’s real estate business

Do’s and Don’ts of DST investments for your family’s real estate business

When it comes to real estate investments, not all are aware of the enormous benefits with which the Delaware Statutory Trust comes. Popular amongst both experienced and inexperienced investors, the DST investment type is quite a profitable one, in fact. But let’s see what things you should and shouldn’t do when managing these.

The five Do’s of DST

  • Do read the PPM. The Private Placement Memorandum will offer you a clear idea on what the programs’ objectives are, who the sponsor is, understand the process’ cash-flow, and what general expectations you should have from this program. If there is something unclear, ask questions. There are plenty of experienced individuals able and willing to answer them.
  • Do adhere to the debt replacement principle. These investments pass to the investor not only the cash resulted from them, but also their debts. Make sure are aware of these coordinates before signing any papers.
  • Do opt for multiple DST investments. The minimum investment amount required is set quite low, and the investor has the opportunity to diversify their portfolio by investing in multiple real estate properties. It is advisable for you to do this as well.
  • Do use the DST as 1031 exchange insurance. If you cannot identify any reliable property for your 1031 investment in the required amount of time, you could use one of your DST properties for this purpose. In fact, many do recommend doing so. Having a backup plan is always better than a failed investment.
  • Do leverage your income with 1031 exchanges. Having an interest in a DST qualifies as a tax-deferred investment. For higher rates of income, many recommend involving in 1031real estate investments as well, completing the circle.

The five Don’ts of DST

  • Don’t take liability for the property. You are not responsible for the property itself. Only the DST is and you should not take any personal liability for it.
  • Don’t manage the property yourself. You know what the greatest part about DST investments is? You don’t have to take care of all the managing aspects like in other real estate investments. The DST is responsible for managing all the properties as well. Keep that in mind and don’t let others tell you differently.
  • You Don’t have to qualify for your property’s loan. The DST is the only entity responsible for qualifying for the property’s mortgage loan. The investor does not have to qualify, keep this also in mind. Because of this reason, you don’t have to provide any personal data or documents to whatever financial entity is asking for them.
  • Don’t stretch your budget. The DST in designed in such manner the investors only have to invest the amount of money they have. Therefore, don’t overstretch your budget no matter what.
  • Don’t spend too much time searching the property for you. Of course, you have to document yourself, but even if you are not pleased with a property, you can switch it at any time, because 1031 investments go hand in hand with DST investments.