Investing in Delaware Statutory Ttrusts (DSTs)

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Have you invested in a DST or DSTs? Rima and I recently discovered them. For "little fish" with just a few million to invest, they seem far better than buying one or a few NNN properties, which puts all of your eggs in one or a few baskets.

Hi Stephen,

Look up Mark Creason on here. He has his securities license and does capital raises for DST's. He can explain more in depth types of costs, potential risks,etc.

The main down side to investing in DSTs is control... you have none. No voting rights, no management rights, no rights to determine what is bought and sold. You are a passive investor with no input. They are a great tool to exchange into with a 1031 if you can't find a property to exactly fit your needs. They can be a more modest income than a NNN. but with less risk and more predictability. However, another major negative is that you also must be in it for the long run because you can't really sell your interests.

@Stephen Masek DSTs are like any investment...pros and cons. If you want to be a purely passive investor, they're great.  Managed real estate - you get the income and pass through depreciation - often you'll be able to invest in property you'd never be able to buy on your own - can diversify both by property type and geographically - low  minimums (generally $100k) - can close very quickly.

Cons would be that you have no voting rights or control. They can also have a lot of up front costs going in (commissions, etc) which can be tough to overcome. 

Look for a Registered Investment Adviser firm that works with DSTs.  My firm is structured this way and we're able to waive those loads/commissions and credit them back to the client.  Cost is much lower.

Some food for thought - pay attention to the property type, debt structure, corporate tenants, and exit strategy.  These things have risk like any other investment.  Also, with enough cash...a good adviser should build you out a portfolio of DSTs.  Diversify your risk. 

On a sidenote - I'm doing some due diligence on a DST sponsor right now that has a liquidity feature in their DSTs. Definitely doesn't fit for everyone, but could fit for some folks. I generally take all my DST clients through a planning process to figure out what the needs are, build in liquidity if needed, and structure a DST portfolio from there.

Hope that helps. 

Instead of DST if this is not 1031 you could simply invest with multiple sponsors if you are an accredited investor. Some take non-accredited but not many.

DST's have limitations. The DST's make money on the heavy upfront fees and with DST's your lucky on the back end to break even from what it was bought for. The creation and packaging is where the people that put them together tend to make the money.

Sponsors for syndicates and not DST's there is more flexibility in structure and future aligned interests. Most sponsors will not take 1031 money as then they are looking at DST or TIC structure with control, cost. and exit plan issues to deal with.

My securities friend does raises for them so explained to me how the companies offering the DST's make money with volume.

I have seen some cases where a DST can make sense if the 1031 buyer cannot find what they want in their limited range or they did buy something and now have a few hundred k they do not want to pay boot on so they put into a DST. It has it's place just be careful of the DST companies who sell,sell,sell it as the greatest thing since sliced bread but do not mention the negatives to it.