Real Estate can be a tricky asset. On one hand, it has the potential to grow in value at rates that at times may be greater than the broader stock market, can be relatively unaffected by stock market swings, can provide rental income, and can work. But on the other, being a tenant of residential properties, managing a primary residence yourself, or affording a mortgage can all add up to put a lot of work on your plate and cost you a lot.
This is to say that there are both right and wrong ways to engage in real estate, and which way is the right way for you depends on your financial situation and goals. But what if there was a new way to invest in real estate; a way that combines the beneficial parts and may help eliminate some of the common barriers of entry for those who would otherwise benefit from being a real estate investor?
Enter the Delaware Statutory Trust
Delaware Statutory Trusts (DSTs) are an investment vehicle that provides access to direct real estate without the obligation to manage the property or the investment process yourself. A DST is essentially a legal entity that provides accredited investors the opportunity to pool assets together to fund a real estate investment – whether a rental property, commercial property, residence, or another type of investment property – without having to micromanage the rent-collecting process, hire maintenance, and scope for cost-efficient upgrades to the property that often require a great deal of expertise to know how to do well. Instead, a separate property management company can take all those responsibilities off your plate, leaving you with the opportunity to see the often high and stable return rates of direct real estate.
The DST help to lower the barrier to entry for many investors and increases the range of options a real estate investor may have. Because DSTs allow fractional ownership of the direct real estate, an accredited investor can essentially invest what they can alongside a pool of other investors that can add up to the amount needed to take on the development, broadening access to real estate investments.
Are DSTs Suitable for You?
It’s important to know that DSTs are often illiquid, meaning the money you commit to investing is stuck there for the duration of the project. While long-term growth through direct real estate investment has the potential to pay off– for those who have a short time horizon for their investment, a DST may not be the right investment opportunity.
However, if you have a long-term investment horizon and have been searching for a way to get into real estate investing but don’t want to deal with the market volatility of real estate company stocks, or take on property management on your own, DSTs may be your next step.
At Asset Strategy, we utilize investment vehicles to help manage your taxes and integrate your investment into your overall financial plan. We can help determine what strategy may work best for you.
Because investor situations and objectives vary this information is not intended to indicate suitability or a recommendation for any individual investor.
This is for informational purposes only, does not constitute individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. Asset Strategy does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstances.
Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated.
There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal.
Advisory services offered through Asset Strategy Advisors, LLC (ASA). Securities offered through representatives licensed with either Concorde Investment Services, LLC (CIS), member FINRA/SIPC, or RCX Capital Group, LLC (RCX), member FINRA. Insurance offered through Asset Strategy Financial Group, Inc. (ASFG). ASFG and ASA are independent of CIS and RCX.
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