All About DST Properties in California
In this article, I'll dive into the topic of DST properties in California.
It is no secret that there are a lot of advantages to real estate investing. And that there are many people who make a comfortable living from investing alone.
Many people like to invest in property to secure their future, and to ensure that, they will have their money tied in something secure for the long haul. No matter what the reason is for you showing an interest in real estate investing, there are certain strategies that you will need to know about to ensure success.
One strategy is a Delaware Statutory Trust Property (DST), and it could be just what you were looking for.
Delaware Statutory Trust Properties
So, what is a Delaware Statutory Trust?
It has nothing to do with owning property in the state of Delaware, but it is defined by Gowercrowd as being a legal entity used in real estate investing which allows for a number of investors to pool their money together to each hold a percentage of the asset (the trust). In other words, if you were to join a DST, you will not be the sole owner of whatever you are investing in. Whether it be a single property or something much larger. They are formed as private governing agreements, and their main advantage is that while they have many of the same benefits that you would have as a single investor, you do not have the management responsibility that comes with investing. Basically, you are sharing the workload, and sharing the benefits. You do not need to know the other people who will be sharing your investment with you, it is completely separate (you will have no responsibility to them and them to you).
Pro’s and Cons of DST’s
Like anything in the world of investing, there is not one strategy that will suit everyone, and even something as beneficial as a Delaware Statutory Trust can be disastrous if mismanaged or not done correctly. Everyone’s individual circumstances will be different, so while DST’s may suit some people, it is in no way a one size fits all. So, what are some of the main pros and cons of DST?
- You do not require any deep knowledge of investing yourself.
- Can allow sellers of real estate to defer capital gains and depreciation taxes.
- Provides limited liability (your income is protected to a certain extent).
- Simple and inexpensive to create and operate.
- Properties that would not have been available to an investor are suddenly opened up.
- Loss of control – you are one of many with a stake in the property.
- It is not simple to simply sell your beneficiary interest (if you no longer wish to be part of the trust).
- Monetary returns can be limited (and will need to be shared).
- They are generally involved in larger scale investments. This increases the risk for everyone.
How do DSTs work?
Realized explains simply how a Delaware Statutory Trust works. Basically someone (a sponsor) will set up the trust, and there will be a list of trustees who manage the business and assets. The trust collects investment money, arranges financing, and possibly hires property managers. Income and distributions are passed through all members of the trust and taxed individually. Each investor becomes what is called a passive investor – in that they have a stake in the property without having to worry about the day-to-day management and the issues that come with real-estate investing. Your individual actions will not greatly affect your investment, so you do not have to worry about making a mistake somewhere along the line and ruining it completely.
DST’s in California
If you are based in California and thinking of entering a Delaware Statutory Trust, you may be happy to know that there are real benefits for investors in California (and even for those investing in California that do not reside there). BiggerPockets details some of the main benefits of entering a DST in California, with the main draw being that because of California’s state laws and tax regulations, there are often tax breaks associated with them. That is, compared with some alternate investment strategies (such as 1031s).
Finding California DST's
So where can you find Delaware Statutory Trust’s in California? There are a couple of key corporations assisting with Californian investors with DST’s:
Corcapa specialize in Delaware Statutory Trusts as well as Tenants in Common (TIC) investments throughout California. They provide a list of currently available DST properties so you can browse and see what is available. They are available for consultations and can help in finding the right DST for your individual circumstance.
Royal Allegal Solutions understand the benefits for Californian residents (or non-residents wanting to invest in California) to enter into a DST, and so can offer sound advisement. You can contact them directly for a consultation, and they will contact you to go through the DST’s they offer, and to provide you with a list of available properties. They are experts in the field, so you know that you can trust them for honest and updated advice.
Delaware Statutory Trusts (DST)’s are rather complex, and so if you are considering entering into this sort of investment, it is a good idea to get some good quality advice and see a specialist who can help to determine whether it is right for you. Every individual circumstance and need will be different, whether you are based in California or anywhere else in the USA. It is your future that is at stake, so you need to ensure that any investment you enter into is beneficial in the long run.