Know A Good DST Company ?
So I've gone through the entire 1031 Exchange Forum and there are very few posts on DST Companies. I am a complete novice at the entire Real Estate game. (I inherited partial ownership in several buildings more than 20 years ago.)
I'm not even sure who the big DST companies are...
I'd like to hear if anyone has invested in one, and would they recommend it ? What have been your actual returns ?
I worry about fee's and don't really see it mentioned very often.
I have large Capital Gains coming (1-2m) and would like to at least defer them so I can spread them out over a number of years. I live in California and the state tax is high.
(I don't have any children to pass it down to, and I can't take it with me, so I'm not concerned about defering it forever.)
Also I have ZERO desire to become a Landlord of any kind. I'd just pay the Cap Gains if being a Landlord was the only option. DST companies might not give the best return but I'll be ok with smaller returns.
Oh and if anyone knows when it says 7-10 years holding period ... what does that mean exactly ? I'd prefer knowing the year, so I could choose different lengths.
Thanks !
#1 Market Trends & Data Contributor
you may want to explore 721-dst, it's dst that at the end the ownership would be converted into REIT shares where you can time when to sell.
btw dst is becoming more interesting now because their interest rate is lower than the typical residential rate as of today.
In order to provide good advice, it'd be helpful to know quite a bit more about your financial situation, BUT, here is an alternative idea that we recently worked through with an investor. It may not be relevant to your situation, but for the benefit of all, I'll describe the scenario.
An investor came with a +$1M gain (and no basis left) to our office with the primary goal of 1031 exchange. Tax deferral was the primary goal, followed by total return over a 10+ year period. Immediate cash flow wasn't a priority.
The investor didn't want a personal rehab project, and everything that was fully stabilized seemed to us like it was priced pretty aggressively. The only thing we found that was somewhat interesting was a syndicated deal with extremely stable (national credit tenant) cash flow of 5% and a short-term 3 year hold period, but little to no appreciation. The original thought was to 1031 into that as a parking place, and wait for a better buyer's market in 3 years to get more aggressive with the subsequent exchange.
But, as we dug into the investor's balance sheet and tax returns, we found significant losses from 2008 that had been carried forward, unused. Ultimately, we let the 45-day window expire and took the net proceeds as boot because we identified a handful of Opportunity Zone investments that were pretty attractive and met the needs of the investor.
We then identified a basket of OZ funds with various business models to diversify risk. An opportunity zone investment can defer the taxable gain through 2026. plus, any tax on the appreciation in the fund will be avoided if the investment is held for over 10 years.
The tax man will come for the original gain in 2026, but we'll use the loss-carry forward at that point.
Depending on your loss-carry forward, this could be an interesting *alternative* to a 1031. Hope that was helpful.
Quote from @Celia Moore:
Inland is huge in the DST space! Robert Smith of Peregrine Private Capital works for Inland and is the broker we use for our deals. He also has an immense video library on the topic: https://www.youtube.com/channe...
The same Robert Smith of Peregrine Private Capital? https://www.investorlawyers.com/blog/peregrine-private-capit...
So, the length is not really predictable...but there are unique options that will give you more control over this, like Cantor Fitzgerald has some 721's , and then there is a secondary market that Inland Capital has..I think it is them.. I use Joe Sera to assist me with purchasing my DST's. I have Dst's from Capital Square, Inland Private Capital and BK Trust and these are all good companies in my opinion, I located DSTs direct through them before using Joe but Joe does a flat fee deal and rebates you back some of the commission (they have to stay in the deal, but at least you keeping more of your equity in the deal). I think Joe Sera is on this site, but he is at : Joe Sera, Vice President Sera Capital Management, LLC. Direct: (443) 247 - 5391 | Cell: (443) 223 - 0371 Schedule a Call | File Drop | www.seracapital.com