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How to Involve Your Family in Financial Management

Investing in real estate has proven to stand against the odds of investing. It is true to say that real estate has gained momentum in investing as it offers more potential advantages. With the introduction of new rules such as tenants being allowed not to pay rent due to Covid 19 and other rental control issues, investors may need to seek other alternatives.

What is DST?

The Delaware Statutory Trust is a legitimate entity used in real estate investment. It is used to pool together investors’ money in an entity that allows each investor to hold a certain percentage interest in the asset. The investors are entitled to one or more income-producing properties. While there are important legislations, each owner is entitled to limited liability.

When used appropriately, DST offers a lucrative option in preserving one's wealth as one is able to defer capital gains following the 2004 IRS ruling on the use of the 1031 exchange. Other real estate entities examples that qualify in the 1031 exchange include self-storage space, office buildings, shopping malls, industrial parks, and other commercial properties.

What it means by 1031 exchange

1031 is a tax deferment system that allows the investor in the real estate industry to postpone capital gains taxes on the sale of property and purchase another property of the same kind. Another key point is that the exchange needs to be taken within a certain duration of time. The transactions need to take place within a period of hundred and eighty days. The last key point to note is that the seller of the asset cannot directly receive the earnings of the asset. In addition, the 1031 exchange may allow property sellers and investors to defer taxes collected from a profitable sale. DST has made use of 1031 exchange for investors exchange to be flexible.

Advantages Offered by DST

Opportunity to passive income

Investors are attracted to DST due to its nature as a passive income. Many property owners are now opting for DST due to the implementation of the 1031 tax deferment exchange. Active real estate management seems to be a time-consuming and tiring engagement for retirement investment. Cashing out such a property hold over a long time incurs a significant capital tax that cancels the accumulated wealth over time. With DST, individuals utilize the 1031 exchange to acquire institutional management assets, which allow them to have a stream of income, rendering the issue of property and asset management.

Access to Long Term Investment

Depending on an investment, DST allows individuals to access commercial properties depending on the leased term. Most of the lease period of DST ranges between 5-20 years of investment. These are stress-free stream years of income associated with the struggles of renegotiating lease terms. Instead of dealing with the renewal of the leasing agreement with tenants, DST provides individuals and family investors a consistent cash flow pre-arranged for that leasing period. It is important to review business credit scores and the future growth of a business before issuing a long-term leasing contract to avoid tenants losing out of business, resulting in losses.

Non-Recourse Loans

Since investors in DST have no control over ownership, most loans taken are non-recourse. This helps investors protect their assets from any liabilities. Non-recourse loans are loans where a lender can have legal ownership of an asset in case of a default or fail of the project to repay the debt.

Diversification

With DST, investors are able to diversify their investment into various commercial properties. This allows the spread of risk to various assets limiting any downfall or losses.

Other advantages associated with DST may include

- DST offers very low investment with as minimum as $100, 000 for 1031 exchange and cash investors ranging at $25000.

- DST takes responsibility for protecting the investor from any liability against all of their investment.

- With DST investment, investors are guaranteed a stipend monthly cash flow to their banks from the asset they have invested in.

With that said, family assets should be used wisely in assuring one continuity of their asset output. DST does not guarantee you a positive performance, but having such information may assist you in undertaking the right decision.

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