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What is a Delaware Statutory Trust?

A Delaware Statutory Trust (DST) is a legally well-defined and secure entity created by the Delaware Statutory Trust Act in 2002. These trusts are designed to hold income producing properties and deliver pro-rata benefits to investors.

The income producing property is held as securitized real estate and Individuals can purchase incremental shares of a DST. These individuals are called trustees. The trustees, also called beneficiaries, hold individual beneficial interests in the trust and receive distributions according to their pro-rata shares in the trust. Since the trust beneficiaries are separated from the trust, as a real estate investor in the trust, the beneficiary can only lose their original investment. They have no legal obligations to repay loans or be a party in a law suite against the property. Trustees benefits include income, depreciation, and appreciation. DSTs typically pay 3% -6% against the amount invested. DST depreciation can offset DST income taxes. It can offset up to 100% of the DST income tax in some cases.

Check the details for your specific investment to learn the depreciation percentage.

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What's aDelaware Statutory Trust?

If you get overwhelmed or would rather have experts handle it, we will be right here, ready to tailor a tax deferral strategy for you.

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When should you use Delaware Statutory Trust?

The Delaware Statutory Trust is typically used in a 1031 Exchange. With 100s of investments to choose from, many investors that no longer wish to manage property but still want the appreciation aspect of real estate investing choose the DST as their next investment. DSTs also have several benefits when used in a 1031 Exchange. A 1031 Exchange requires that both the mortgage and equity be invested into a replacement property of equal or greater value to the relinquished property. A DST can fill the gap on the equity side and the mortgage side.

a simple example:

A simple example, James sold his land for $1,000,000 but he had a loan for $500,000. After paying the loan in escrow, James now has $500,000 with a 1031 Exchange accommodator. James can either:

Buy new investment property for $1,000,000 or more by using his $500,000 from the 1031 Exchange as a down payment and getting a new loan for the rest, or
Buy $500,000 in one or more DSTs with a 50% loan to value (LTV).

The DST option does not require James to get a new loan because, when he made the investment into DSTs, he made an equity investment of $500,000 and also bought $500,000 in debt based on James’ pro-rata ownership in the 50% LTV DST. Now James has investment income and depreciation from a professionally managed real estate investment without the hassles of managing real estate and no mortgage payments.

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Top 10 Reasons to use a Delaware Statutory Trust

Is a Delaware Statutory Trust a good investment? The Delaware Statutory Trust can be a good investment, but it is not a great investment. There are other real estate investments that pay more with about the same risk. Also, owning your own real estate can have significantly higher appreciation than buying into a DST. But…
DSTs allow real estate ownership benefits without the hassles.
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We only work with specific providers that provide institutional grade contracts with experienced property managers. The companies we work with survived the Dot Com Bust, 911, and the Financial Crisis. DSTs tend to be 5, 7, or 10 year investments. We feel it is important that the company you work with is still around in 10 years.

The key benefits of a DST over other real estate investments include: ‍

Avoid Financing Obstacles

You do not need to qualify for a loan in order to use a DST.

Great Back-Up Property

If you are in a 1031 Exchange and your replacement property deal falls through, the DST can fill in as a back-up replacement property.

Avoid Taxable Gains on Boot

If you have money left over in a 1031 Exchange, you can use a DST to close the gap.

No Property Management Headaches

If you are tired of tenants, toilets, trash, termites, teenagers, and turmoil; Let professionals manage the property foryou.

Diversification Benefits

You can buy multiple DSTs in different states and different asset classes to mitigate location risks.

Remove a Reason Not to Sell

DSTs remove a reason not to sell, so you can make a return on your investment quicker and easier.

You Can Swap Til You Drop

With DSTs, you can swap and interchange properties until you drop.

Estate Planning (100% Step-Up in Basis)

DSTs are real estate investments which allows a step up in basis when the ownerpasses. The DST is still part of your estate.

Quality Properties and Leverage Options (LTV)

There are literally 100s of DSTs looking for investors at any given time across the US. There is also a wide variety of asset classes to choose from.

Low Minimum Investment Amounts

The requirements for minimum investment amounts for DSTs are relatively low, typically $100,000 or more.

Using the delaware statutory trust
as a 1031 Exchange Back-Up
Strategy

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Client Taxes Saved

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Years of Experience

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How do I purchase a Delaware Statutory Trust?

Since a DST is securitized real estate, it can only be sold through a Registered Investment Advisor or a Broker-Dealer. Our company will discuss your investment goals, determine if a DST is right for you, then set up meetings with DST providers that will show you DSTs currently available that meet your needs. Our goal is not to sell products with the highest commission. Instead, we will find high quality products that meet your needs, education you on the details, and let you decide if anything is right for you.

There are two types of companies that can sell a Delaware Statutory Trust.

Broker – Dealer (BD): A BD is paid by commissions, typically 6%+ of your investment

Registered Investment Advisor (RIA): An RIA is paid by fees, typically $1,000 to $25,000.

We are an RIA. We don’t chase commissions. In fact, based on the agreements we have with our DST providers, we refund the BD commissions back to you.

So your minimum investment of $100,000 in a DST becomes $106,000immediately. You then have the choice of paying us a one-time fee or a percentage of the income generated. Both are far less than $6,000.

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We are Tax Deferral Consultants. We have 17 legal tax reduction, tax deferral, and tax elimination options we can combine into hundreds of strategies.

This was a quick overview of the Delaware Statutory Trust; what it is, when to use it, how good of an investment it is, and how to purchase one. The real value of this investment depends on your investment goals and your specific situation. If you are interested in learning more, we have complimentary 25 minute appointments designed to discover what works best for your situation.

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