5 Things to Look for in a Delaware Statutory Trust (DST) Broker

Your financial success can be made or broken when you set out to select the best Delaware Statutory Trust (DST) broker for your 1031 exchange. Investors frequently have to make complex evaluations, but it's crucial to know who to trust and where to put their money.

Finding the DST investments that make the most sense for you is essential, as is getting informed, experienced guidance about which DST(s) to select from someone who has your best interests in mind. Your broker should also be able to match you with investment options that are in line with your objectives and goals by taking the time to get to know you, as well as have a diverse selection of investment options accessible, a grasp of the management and track record of the DST sponsors.

Discover the warning signs and signals to look out for when selecting a DST broker to guide you through your 1031 exchange.

5 Essential DST Broker Characteristics And Important Warning Signs

When selecting a broker, being aware of what to look for and what to avoid might be helpful. As a result, you will be able to think through your investments with confidence knowing that you are receiving information that is specific to your needs. However, more importantly, you will feel more at ease knowing that you are working with a professional, experienced broker who is concerned about the success of your investments and who wants to build a long-term relationship with you.

1: Are they reputable and established?

Since the DST industry is smaller than you might imagine, when professionals mistreat their clients, word spreads quickly, especially if it is a regular occurrence. Consider a scenario in which a company or broker has a history of advising clients on substitute properties that are less ideal. That is a red flag that they probably don't have the interests of the investor at heart.

What to do: Verify that the broker you are considering has knowledge and expertise navigating market cycles. Inquire about their background in real estate and investments, including how long they've been doing it and what they did previously.

2: Do they disclose conflicts of interest and take steps to minimize them?

You need a consultant who will support you despite their competing interests. When deciding whether to engage with them and when analyzing the advice that they provide, anything that could affect their ability to defend your financial interests should be taken into account.

A stringent professional code of conduct is followed by the top DST brokers, so they won't have any improbable interests in the DSTs they recommend or don't. This indicates that neither the broker nor their business are owners of the DST investment. Of course, there will always be some degree of conflicts of interest, such as pay.

What to do: It's important to ask your broker directly if they or their business are associated with or owners of the DST investment opportunities they present to you. Ask them if there are any other potential conflicts, such as pay agreements.

3: Does your prospective DST broker learn about and comprehend your unique situation?

This is more significant than it first appears to be. Your broker should be entirely focused on getting to know you and developing an appropriate investment strategy that is specific to your goals and situation.

Make sure they also prioritize education and offer a balanced view of the dangers and opportunities.

What to do: Consider the suggestions that your broker gives. Anything that doesn't seem like it would be a good idea for you, challenge it. They should provide you options and explain why each one would be the best choice given your circumstances. It is likely that they have not done much investigation if they are unable to discuss the benefits and drawbacks of each investment and provide precise guidance on how to approach those decisions. This suggests that you might not be receiving a unique set of recommendations.

Business project team working together at meeting room at office.Horizontal.Blurred background.Flares

4: What kind of analysis and due diligence team do they employ when evaluating offerings?

You count on your DST broker to be knowledgeable about each DST sponsor and each one's unique offering. The more thorough the investigation and due diligence, however, the more valuable the knowledge will be to investors as they choose which DST to invest in. Having enough pertinent knowledge is the foundation for making well-informed decisions.

Ask your broker if they have a team dedicated to analyzing DST offerings, and if so, how experienced they are. If they respond that they only rely on information from third parties or that their broker-dealer approves such offerings, that is probably insufficient. A staff within the broker should be solely responsible for examining the offerings. Inquire from the broker regarding the training and experience of their due diligence analysts.

5: Is your DST broker impartial and practical?

Although integrity and expertise can be discerned in a number of ways, promissory language is a surefire indicator. Never accept success or results guarantees from your broker. In reality, they ought to be upfront about prospects, risks, rewards, pros, and their limitations.

They will be aware of market volatility, have carefully researched the assets they are proposing to you, and never speculate in a way that ensures the performance of your investment in the future. Anyone who talks as though they possess a crystal ball is not being rational or impartial.

What to do: Be skeptical of concrete language about how much money you'll make from investing, and be prepared to walk away from overblown promises. Instead, a wise broker will examine many scenarios in order to determine the value of an investment. They will be able to express their evaluation of the risks and value based on your unique scenario, which is maybe most significant.

Conclusion: Choosing a Reliable Broker

A one-time trade of professional services should be avoided when looking for the ideal DST broker. Look for someone who views the connection as a partnership.

If you're thinking about selling an investment property, it's important to be aware of all your alternatives in order to get the most money possible. Call us right away. Our experts would be pleased to speak with you in further detail regarding the potential advantages of various investing strategies.

General Disclosure

Not an offer to buy, nor a solicitation to sell securities. Information herein is provided for information purposes only, and should not be relied upon to make an investment decision. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing.

Securities offered through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC is not affiliated with any other entities identified in this communication.

1031 Risk Disclosure:

The Benefits of DSTs for Real Estate Investors

What exactly is a DST (Delaware Statutory Trust)?

For authorized investors who want to make fractional real estate investments, a Delaware Statutory Trust, or DST, is a frequently used structure.

The main benefit of investing in a DST is that it qualifies for a 1031 Exchange, which enables investors who are selling a property to postpone paying capital gains tax by putting the profits into a DST, which the IRS has determined is an investment of "like kind."

National real estate corporations typically "sponsor," or bring to market and make available to accredited investors, DST offers. These offerings can be made available through third-party securities broker-dealers. The property(ies) to be offered under the trust are purchased by DST sponsors. In order to make sure the trust is eligible for 1031 exchange purposes, the DST sponsor will perform due diligence on the property, occasionally acquire long-term debt that is non-recourse to investors, and organize the necessary paperwork. The DST sponsor will then offer the asset(s) to accredited investors on a fractional ownership basis, and in exchange will get payment for organizing, supervising, and managing the investment on their behalf.

The Evolution of DSTs

Tenant-in-common real estate, or "TICs," is a type of co-ownership that is discussed in more detail below. In the early 2000s, some of the biggest real estate sponsors in the country and their attorneys urged the IRS to create regulations that would allow TICs to qualify for 1031 exchanges. Investment in TICs soared as a result. Investors soon encountered some of the difficulties brought on by TICs, such as the requirement for investor unanimity in order to make certain sorts of property-related decisions.

The idea of investing through a DST started to catch hold at about this time. DSTs offered more flexibility than TICs and addressed some of the concerns of investors, notably with regard to the clauses requiring unanimous consent.

It was no surprise, then, that investors and sponsors asked the IRS to adopt identical 1031 exchange standards for DSTs. As a result, the IRS released Revenue Ruling 2004-86 in 2004 that permitted the use of the DST structure to buy real estate where the trust's beneficial interests would be recognized as direct interests in replacement property for the purposes of a 1031 exchange. The syndicated real estate sector hailed this as a significant triumph.

Prior to the start of the Great Recession in 2008, both TICs and DSTs were commonly utilized. Their appeal declined along with real estate values. TICs were impacted more than DSTs. Few individual investors were willing to assume the risk of jointly owning so much underwater real estate. At least with DSTs, the DST sponsor was responsible for loan repayment, not individual investors. Investment in real estate syndication increased as the economy strengthened. Given the difficulties involved with TICs, DSTs are now frequently regarded as the preferred way of fractional real estate ownership.

The Distinction Between DSTs and TICs

For long-time real estate investors, DSTs are a relatively new notion. Instead, tenant-in-common real estate investments, or TICs, are more commonly known to long-term investors. Both TICs and DSTs allow people to invest fractionally in real estate. They can both be combined with 1031 exchanges. As a result, it is understandable why some individuals mistake TICs for DSTs. There are, however, some significant differences between the two.

The degree of investor involvement is a key area of distinction. The co-owners of a TIC are typically more actively involved in managing the property on a day-to-day basis, including property management. DSTs are really passive investments in which the sponsor manages the transaction on the part of the investors.

The need for unanimous co-owner approval for all significant actions is one of the reasons management of TICs may be so difficult. In actuality, this is one of the difficulties that prompted the development of DSTs. Many investors were put off by the unanimous approval needed for TICs, and those who had previously invested in TICs encountered difficulties.

Another difference between TICs and DSTs is how they hold title to the property. Each TIC co-owner has a little portion of the property's title. Individual investors do not actually own the real estate asset; instead, the DST does. In terms of financing, this has consequences. The individual co-owners of a TIC are liable for any debt used to fund the property, whether for acquisition or upgrades. This makes it necessary for lenders to individually vet each borrower, which can be time-consuming for most of them and make it challenging to finance real estate held in TICs. Since the asset is solely held by the DST on behalf of the investors in a trust arrangement, DST investors do not directly incur debt.

TICs and DSTs also differ in terms of the number of investors authorized to participate. In contrast to DSTs, which are limited to 499 individual investors, TICs are only permitted to have 35 investors (or "co-owners").

Finally, the minimum investment for DSTs is typically lower than that of TICs because more investors can engage in them. Compared to DSTs, which typically permit contributions as little as $100,000, many TICs need at least a $500,000 commitment (or sometimes less).

Focused senior husband and wife sit at table at home look at laptop screen pay bills taxes online. Concentrated mature man and woman couple make internet payment on computer, manage finances

How are DSTs Used by Investors?

An investor can benefit from the advantages DSTs provide in one of two ways. Investing with funds from a 1031 exchange is the first and most common method. Direct cash investment into a DST is the alternative.

1031 Exchanges
Traditionally, an investor wanting to avoid paying capital gains tax on the sale of a real estate asset will perform a 1031 exchange and utilize the profits from the sale to invest in another "like kind" asset. However, there are stringent rules for 1031 exchanges. In accordance with current regulations, for instance, investors must:

Find a potential replacement property within 45 days of the sale. Close on the replacement property(s) within 180 days of the sale. Reinvest 100% of net sales proceeds, also known as equity, into the replacement property. Acquire an equal or greater amount of debt on the replacement property.
It can be challenging to meet these requirements, especially in the competitive real estate market of today.

DSTs are a 1031 exchange alternative for "whole property."

Investors can instead transfer the money received from the sale of their property into a DST. The investor will thereafter possess proportionally fractional ownership in the property (or properties) owned by the DST. DSTs are already in place (or "pre-packaged," if you prefer) and prepared to receive investors, enabling someone selling their property to typically move fast in conformity with the IRS's 1031 exchange standards. All due diligence on the actual estate is already complete. Additionally, under present law, the profits from the sale of the investors' property will be eligible for the same capital gains tax deferral as if the investors had invested via a whole property 1031 exchange.

Investors occasionally combine methods by purchasing both a DST and a full property. When an investor discovers a suitable replacement property (or properties), it frequently happens that they still have extra money from the sale of their former asset. To fully benefit from the present law's 1031 exchange benefits, the investor may use the remaining sales proceeds and invest that money in a DST.

Potential Rewards of DST Investment

There are several potential benefits of investing in a DST, several of which are described below:


As you can see, there are a lot of reasons why an investor should think about making a DST-based real estate investment. For investors seeking to fully benefit from advantages normally associated with conventional 1031 exchanges, the DST model offers exceptional flexibility, opportunity, and investment variety.

Additionally, investors can close on DST investments rapidly — frequently in a matter of days. Therefore, investing in a DST can be a terrific alternative whether you're an accredited investor looking to deploy your funds for the first time or someone who has a strict deadline to do so after a 1031 sale.

Are you eager to discover more about DSTs? Contact us today at Perch Wealth to discover more about our current DST real estate offers and how we might possibly help you.

General Information
neither a buy-side nor a sell-side solicitation of securities. The material presented here is purely for informational purposes and shouldn't be used to guide financial decisions. Every investment has the chance of losing some or all of the money. Future outcomes cannot be predicted based on past performance. Prior to investing, consult a financial or tax expert.

Financial products made available by Emerson Equity LLC Member: SIPC/FINRA. Only accessible in states where Emerson Equity LLC has a recognized business presence. There are no other organizations mentioned in this correspondence with whom Emerson Equity LLC is associated.

1031 Risk Disclosure: * There is no assurance that any strategy will be effective or achieve investment goals; * Property value loss is a possibility for all real estate investments over the course of ownership; * Tax status may change depending on the income stream and depreciation schedule for any investment property. All funded real estate investments have the risk of going into foreclosure; adverse tax rulings may prevent capital gains from being deferred and result in immediate tax liability;
1031 exchanges are illiquid assets since they are frequently issued through private placement offerings. There is no secondary market for these investments. * Reduction or Elimination of Monthly Cash Flow Distributions - Similar to any real estate investment, the possibility of suspension of cash flow distributions exists in the event that a property unexpectedly loses tenants or suffers significant damage;

How Should I Invest My Wealth in 2022?

The present market offers financial backers a plenty of speculation valuable open doors across various ventures. While having different choices can assist with further developing a singular's venture methodology, they can likewise cause vulnerability, bringing up issues about which speculation suits the individual's monetary targets. So you may be wondering where do I invest my wealth in the current economy.

To help give guidance on which investment is ideal for you, we will frame the fundamental components of the present most wanted speculations and go over the upsides and downsides of every one.

For this article, we will isolate the data into two segments. To start with, we will take a gander at more conventional speculation choices, like putting resources into stocks or bonds. Then, we will audit elective speculations. Albeit less known among the present financial backers, elective choices offer potential advantages that numerous customary speculations need.

Customary Investment Options

By and large, financial backers have depended upon a 60/40 portfolio piece to assist them with accomplishing their long-term monetary dreams, for example, fabricating a savings for retirement, reimbursing a home loan early, or paying instructive costs for their youngsters. As indicated by this model, a financial backer's portfolio ought to comprise of about 60% stocks and 40 percent bonds. This model generally would in general convey financial backers stable development and pay to assist them with meeting their monetary objectives.

Stocks, or values, are protections that address partial possession in an enterprise. Financial backers purchase stocks and depend upon the organization's development to expand their abundance after some time. Also, stocks may offer financial backers profits - or installments to investors - for recurring, automated revenue. Then again, bonds are obligation protections presented by a company or government substance hoping to raise capital. Not at all like stocks, bonds don't give financial backers proprietorship freedoms, yet rather they address a credit.

The largest contrast among stocks and securities is the manner by which they produce benefit: stocks should appreciate in esteem and be sold later on the financial exchange, while most bonds pay fixed interest after some time.

While stocks offer financial backers the potential for more significant yields than securities, securities are by and large considered a safer venture. Therefore, numerous financial backers go to venture reserves, like common assets, trade exchanged reserves, or shut end assets, to broaden their portfolios while keeping a 60/40 arrangement. These venture subsidizes arrange capital from various financial backers, which is then, at that point, put into an arrangement of stocks and bonds. Venture subsidizes offer financial backers the possibility to moderate risk through a more adjusted portfolio.

A Change in the Portfolio Model

Because of progressing unpredictability in the stock and security market, rising costs for wares, and high valuations, the customary 60/40 portfolio model is done serving financial backers in a similar way it once did. Therefore, numerous monetary specialists are presently suggesting that financial backers broaden their portfolios with 40% elective ventures to help possibly advance their monetary position.


Elective Investments

While various kinds of elective ventures exist, we will zero in on elective land speculations because of the advantages they might perhaps offer financial backers in the present market.

Why Invest in land?

Land has for quite some time been one of the most sought-after open doors for financial backers. As a restricted ware, land has generally managed the cost of financial backers the potential for long haul security, fantastic returns, recurring, automated revenue, charge benefits, and a fence against expansion. Notwithstanding, land speculations additionally accompany specific drawbacks. Beginning in land effective money management ordinarily requires a broad measure of capital and solid financials for the individuals who are utilizing obligation.

Besides, land by and large requires dynamic support - financial backers are expected to deal with their resources for guarantee ideal execution. In this manner, elective interests in land have begun filling in prominence among the venture local area. While they can frequently offer comparable benefits to land money management, they convey a uninvolved open door, meaning they have zero administration obligation. The following are a couple choices for financial backers looking for elective land speculations.

Real Estate Investment Trusts

A real estate investment trust (REIT) is an organization that possesses and normally works pay creating land or related resources. REITs consolidate all resource types, including multi-family, retail, senior living, self-capacity, cordiality, understudy lodging, office, and modern properties, to give some examples. Dissimilar to other land ventures, REITs by and large buy or foster land for a drawn out hold.

Financial backers depend on a REIT's comprehension expert might interpret the housing business sector to broaden and balance out their portfolios. Numerous REITs are public, implying that all financial backers, including unaccredited financial backers with restricted capital, can put resources into them.

While public REITs convey many benefits related with customary land effective financial planning - like pay potential, broadening, and conceivable expansion security - they additionally accompany some particular inconveniences. For instance, REITs frequently experience slow development. Since REITs should pay out at least 90% of their benefits in profits, new acquisitions and improvements are restricted. To decide the strength of a venture, potential financial backers ought to lead a reasonable level of investment - with the help of a specialist on the REIT before buying shares.

Delaware Statutory Trusts

A Delaware Statutory Trust (DST) is a lawfully perceived land speculation trust where financial backers buy a possession interest, or partial proprietorship, in a land resource or land portfolio.

DSTs are usually depended upon by 1031 trade purchasers since they qualify as a like-kind property per the Internal Revenue Service (IRS).

As well as giving financial backers recurring, automated revenue potential through an administration free venture, DSTs empower financial backers to put resources into institutional quality resources for which they wouldn't in any case have access. These resources might have the option to convey more significant yields and longer-term strength.

Moreover, the obligation designs of DSTs are appealing to numerous financial backers. Individuals who put resources into DSTs have restricted obligation equivalent to their ventures; nonetheless, they can exploit the frequently alluring funding gotten by the support organizations. Sadly, just licensed financial backers can put resources into DSTs.

Opportunity Zones

Opportunity zones (OZs), characterized by the IRS, are "a financial advancement device that permits individuals to put resources into upset regions in the United States. This incentive’s intention is to prod financial development and work creation in low-pay networks while giving tax breaks to financial backers." OZs were presented. under the Tax Cuts and Jobs Act of 2017, and financial backers keen on putting resources into an OZ should do as such through a qualified opportunity fund (QOF).

QOFs can be an eminent choice for financial backers because of their tax breaks, which rely upon the period of time a financial backer holds a QOF venture. We have recently made sense of these advantages, which we allude to as OZ triple-layer charge motivators. Here is a depiction of the tax cuts a QOF offers a financial backer:

● Deferral: Those who rollover their capital increases into a QOF can concede capital earn respect from the first speculation until December 31, 2026.

● Decrease: how much capital increase perceived from the first speculation is diminished by 10

percent in the wake of accomplishing a five-year holding period, as long as that five-year holding period is accomplished by December 31, 2026.

● Avoidance: Long-term financial backers are qualified to pay no expense on the enthusiasm for their QOF venture upon attitude of that speculation, no matter what the benefit size, assuming the resources held in that QOF are held for no less than 10 years.

While opportunity zones are viewed as an unsafe speculation, provided their motivation, they might possibly convey financial backers better yields when contrasted with other elective land venture choices.


Interval Funds

An extra elective venture choice worth focusing on are interval funds. These assets are not restricted to land yet rather can be utilized to put resources into numerous protections, including land. Comparable to recently referenced reserves, these arrange investor money to put resources into various protections. Be that as it may, they offer a lower level of liquidity. Rather than having the option to exchange shares everyday, financial backers are normally restricted to selling their portions at expressed spans (i.e., quarterly, semi-every year, or yearly). The advantage of stretch assets is the adaptability they offer the assets - they permit the asset to execute longer-term procedures, making the potential for a more steady venture.

Accordingly, interval funds will generally convey better yields and a more broadened an open door. Presently, where do I put away my cash today? While the above data offers a depiction into the upsides and downsides of different speculation choices, you ought to think about extra perspectives. As opposed to promptly attempting to distinguish which choice is ideal for your purposes, the critical focal point here is to comprehend that the present market offers a variety of venture choices that were already obscure to quite a large number. Financial backers can broaden past stocks and bonds, which might potentially give them more significant yields while trying to relieve risk. To foster a venture portfolio that meets your monetary objectives, we encourage you to talk with one of our monetary experts.

General Disclosure

Not an offer to buy, nor a solicitation to sell securities. Information herein is provided for information purposes only and should not be relied upon to make an investment decision. All investing involves risk of loss of some, or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing. Securities offered through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC is not affiliated with any other entities identified in this communication.

1031 Risk Disclosure: