Tags: DST 1031 Exchange

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

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Daniel Raupp

Under Daniel Raupp's guidance since 2000, Fortitude Investment Group, LLC has guided clients into over $1 billion worth of securitized real estate investment offerings directly and indirectly, in both the DSTs for 1031 Exchanges and REITs. In the areas of real estate, tax advantaged investments, insurance, retirement, and estate planning, he is able to set up comprehensive, individually tailored client portfolios designed to help remove market volatility and maximize income potential without undue risk.

Inspired by his father’s dedication to customer service and hard work, Daniel directs a range of strategic initiatives in the firm to successfully leverage core competencies in tax efficient investing, alternative investments, and operational excellence to create customer value. His credentials include a Series 7 General Securities Representative (GS) License, Series 24 Principal of General Representatives License, Series 63 Uniform Securities Agent License, and a Life/Accident and Health Agent License. Check Daniel’s background on FINRA’s BrokerCheck.

This is for informational purposes only and is not an offer to buy/sell an investment. There are risks associated with investing in Delaware Statutory Trust (DST) and real estate investment properties including, but not limited to, loss of entire principal, declining market value, tenant vacancies and illiquidity. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This information is not meant to be interpreted as tax or legal advice. Please speak with your legal and tax advisors for guidance regarding your particular situation.

Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Insurance products offered through Concorde Insurance Agency, Inc. (CIA) Fortitude Investment Group is independent of CIS, CAM, and CIA.

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