What is a 1031 Exchange?
A 1031 Exchange is when you sell a commercial property and exchange it into another piece of commercial property to defer the taxes. This property must be a like-kind property, which can also include a residential rental property.
What is a DST?
A DST is a Delaware Statutory Trust, which is a commercial property that is securitized and qualifies for a 1031 Exchange. The big difference with a DST is that you are no longer responsible for managing the properties; you are letting another company manage them while you can still earn money from the properties.
When Can a DST be Helpful in a 1031 Exchange Strategy?
There are so many ways that a Delaware Statutory Trust can be helpful in a 1031 Exchange strategy.
One benefit, for example, is when you’re selling one property that is 2 million dollars and you can only find a 1.5 million dollar property that you like. The issue is that you have $500,000 leftover, which is called the boot which you will get taxed on.
You can put that money into a DST, which is a 100% tax-deferred exchange.
- Diversification on your portfolio.
- Simplify your estate planning.
- A DST is a great backup in case your 1031 Exchange doesn’t suit your needs anymore.
- And so much more!
Learn More About 1031 Exchange and DST Strategies
If you are interested in learning about all of the ways that you can incorporate a DST with your 1031 exchange, contact Kevin Walker at Great Lakes Properties and Investments with any questions.