Why it is critical to work with a financial representative experienced in rollover transactions.

Congratulations! The Delaware Statutory Trust (DST) you invested in years ago as a replacement property for your 1031 exchange has gone full cycle and sold to another investor. Hopefully, the distributions you received over time and a profitable sale have validated your investment decision.

You Have Options

You have several choices now when considering what to do with your proceeds from the liquidation. You can:

• Elect to receive the cash proceeds and pay your taxes
• Use DSTs that offer an UPREIT (721) option to invest in a larger more diverse REIT
• Elect to use a 1031 exchange and acquire a property you intend to actively manage
• Elect to use a 1031 exchange and invest in another DST

We find that most of our clients who own a fractional interest in a DST that is liquidating prefer to reinvest again in another DST. Most investors enjoy the passive nature of a DST investment and are pleased to access institutional-quality real estate property through fractional ownership.

But while transitioning from a liquidating DST to a replacement DST is a widely popular approach for investors, this type of transaction still requires the steady hand of an experienced team of professionals to help ensure your reinvestment goes smoothly.

As you likely remember from executing your previous DST investment, your advisor, qualified intermediary, tax expert, and real estate attorney typically represent the four anchors of the professional team you will be working with on your new investment. 

Much to Consider

Your team must have a clear view of your current exchange status and intentions, which can include:

1. The liquidation date of your current DST
2. Your declaration to use a DST as a replacement property for your 1031 exchange
3. Timing for the distribution of proceeds to be held by your QI
4. Accurate dates you will need to meet your 45-day and 180-day exchange requirements
5. Equity and leverage replacement requirements for your new exchange
6. Identified replacement property or properties
7. Choice of replacement property ID rule you intend to use (3-property, 200% or 95%)
8. Sponsor due diligence and selection process
9. Beneficiary changes since previous DST investment
10. Potential regulatory changes that could affect your exchange

As you can see, there are many critical moving parts that require prompt attention, and this is why it is so vital to work with an advisor who has not only experience with these types of “rollover” exchanges but also has experience working with and coordinating the efforts of your other professional team members.

Easing Your Burden

However, perhaps the most essential role your financial representative will play is to help you find the right replacement property that best fits your specific needs. 

Because a liquidation event can often come as a surprise to DST investors, the time typically required to identify potential replacement properties AND conduct suitable sponsor and investment due diligence is usually compressed.

Our team of professionals at Fortitude Investment Group recognizes the tall challenge this may create for you.  That is a fundamental reason why we:

• Constantly evaluate new DST offerings that are brought to us because of deep relationships with premier sponsors.
• Meet with these sponsors and conduct a very thorough due diligence process.
• Have access to a frequently refreshed inventory of a wide variety of DST investments designed to help meet many different investor objectives.

Simply put, we do the hard work up front, so you will never need to make a hasty or ill-informed decision with your DST rollover transaction. Contact us today to discover how we can help you