When planning the sale of an asset or a business property, it is important not to forget the 1031 tax deferral benefits. This type of exchange is very popular in the investment world and for good reasons. By participating in a 1031 exchange, in other words a tax-deferred exchange, you have the chance to swap your investment or your business property for a like-kind one and, most important, not pay capital gains tax. As long as your DST real estate qualifies for a 1031 exchange, you can make profit and maybe focus your attention on other matters in life. The DST allows for a flexible structuring of the entity, which is the reason why it is preferred to tenant-in-common ownership. Actually, the DST structure has many advantages over TIC ownership.
Increased number of investors
Although there are some similarities between the tenant-in-common and the DST concept, they are not exactly the same. More precisely, there are striking differences between the two. The TIC investment property allows for no more than 35 co-investors, which in turn restrains the number of financial transactions. On the other hand, Delaware Statutory Trusts can have as many as 100 investors and each one enjoys benefits on the assets hold by the other parties. In the Delaware Statutory Trust, there is no such thing as partnerships such as single-member limited liability companies. It is clear that tenants in common structure is quite burdensome and is not thus a reliable investment plan.
One loan and one borrower
Not only is the DST not limited in terms of number of investors, but those who own a beneficial interest in the trust are not required to make additional financial investments. The initial one is more than enough. However, it is a lot easier to obtain financial financing. The fact is that the investors in the Delaware Statutory trusts are not the ones asking for cash. The trust is actually the borrower and it is needless to say that this is an advantage. You have a higher degree of security, not to mention that it is a lot cheaper.
You can invest in a larger property
Even if you have a small amount of cash, you can still acquire a property that is more imposing in size. It is true that you are somewhat limited to the type of real estate, yet you have the opportunity of investing in properties such as malls or anchor stores. When it comes to the financial statement, there is no major difference between Delaware Statutory Trusts and TIC ownerships. Or is there? Well, it is worth mentioning that with DST ownership the accounts are not that complicated. In other words, you will not have to deal with any hassles.
The bottom line is that the Delaware Statutory Trust has quite a few advantages over tenant-in-common ownership. In order to take advantage of the many benefits of a DST 1031 exchange, it is necessary to first find a like-kind property. If the exchange is successful, you will be able to use a part of the money you receive and invest in another possession.