DST 1031? 3 Things For Beginning Investors To Know

Posted on: 19 November 2020


Throughout the US and other developed countries around the globe, investments in the purchase of homes, land, and businesses has proven to be a reliable way to build wealth for both individuals and groups of like-minded investors. Successful investors use a combination of proactive management strategies aimed at building income and value for each property as well as any available, legal means to reduce the burden of taxation to continue building their real estate holdings and overall wealth. 

One commonly used legal option for reducing the amount of taxes due when selling investment real estate is to take advantage of the Delaware Statutory Trust, commonly referred to as the DST 1031 tax deferred exchange, or simply the 1031 exchange. 

What is a 1031 exchange? 

A basic 1031 exchange allows an owner of a parcel of real estate to sell a property and avoid paying capital gains taxes by using the proceeds of the sale to purchase a similar type of property within a certain timeframe. DST 1031 exchanges can be utilized by both independent property owners and those who participate in some type of fractional-ownership program where multiple owners are allowed to invest in one or more pieces of real estate as a for-profit venture. 

How can the use of a DST 1031 help small investors? 

One of the most important benefits of exploring DST 1031 services as a small investor is that it provides a safe structure in which small, steady investments can grow over time without incurring the potential problems associated with being the sole owner of a property. In addition to sharing the profit, any costs and liabilities involved in owning the properties covered under the 1031 exchange are shared among all owners, according to the amount of their fractional ownership interest. 

Beginning investors are generally able to engage in and profit from fractional ownership with a relatively small, affordable investment amount. Additionally, this type of fractional-ownership arrangement can enable them to hold an interest in multiple properties, instead of tying their investment strategy to just one or a few properties. 

How does the DST 1031 exchange help in a tight market? 

DST 1031 exchanges are also helpful to investors in situations where the market is tightening and there are few opportunities to exchange a property for another of like kind. In these instances, investors may be able to choose to invest their profits from the sale with a service that handles fractional-ownership arrangements. 

To learn more about this type of investing, beginning investors should take time to meet with a reputable DST 1031 service provider in the area where they wish to invest.