LOS
ANGELES, May 2, 2024 /PRNewswire/ -- Cove Capital
Investments today released the following article by Dwight Kay, Founding Partner and Managing
Member, Cove Capital Investments:
Article Summary:
Delaware Statutory Trusts (DSTs) offer several potential
advantages for real estate investors, including tax benefits, hands
free ownership opportunities, access to high-quality properties,
and the ability to potentially generate monthly income via ACH
direct deposit. These DST pros make DSTs an appealing option for
investors looking to expand their real estate portfolios with no
management responsibilities or headaches.
However, DSTs also come with some cons, such illiquidity and
other inherent risks associated with real estate investing.
Understanding both the pros and cons of DSTs is crucial for
investors considering this 1031 exchange investment vehicle for
their portfolios.
Key Takeaways:
- How do DSTs provide investors tax advantages?
- What is hands free ownership, and why do many investors like
this about DSTs?
- What advantages does "beneficial ownership" provide DST
investors?
- What are the responsibilities of the trustee in a DST
structure?
- What are some of the risks associated with DST investments and
real estate investing?
Serious real estate investors consistently seek ways to maximize
returns and minimize tax burdens. The Delaware Statutory
Trust (DST) 1031 Exchange strategy is one innovative
investment vehicle that provides numerous benefits to real estate
investors, from deferring capital gains taxes to providing passive
income and access to large commercial and multifamily investment
properties.
Delaware Statutory Trust Potential Pros
Tax Advantages
Imagine selling a property, making a substantial profit, and not
losing a significant portion to the government through capital
gains taxes. Delaware Statutory Trusts can make this a reality. By
reinvesting your sale proceeds into a Delaware Statutory Trust with
the help of a Qualified Intermediary, and within the timeframe
outlined in IRS Code Section 1031, investors can defer capital
gains taxes in order to redeploy capital into additional real
estate investment options.
Hands Free Investing, Active Returns
Beyond tax deferral benefits, DSTs epitomize hands free
ownership. Investors can eliminate the hassles of active real
estate management and enjoy the freedom of having a professional
real estate trustee (the Delaware Statutory Trust sponsor company)
handle 100% of the property management responsibilities. This means
no more of the terrible 3 T's: toilets, tenants, and trash. In this
way, DSTs help investors create more free time to focus on what
matters in life while your real estate generates potential monthly
income for you via ACH direct deposit.
Access Larger Real Estate Assets
DSTs often invest in large, commercial-grade and
multifamily properties that would be typically financially
out of reach for most individual investors. By pooling resources of
other DST investors through the "beneficial ownership structure" of
Delaware Statutory Trusts, investors have the potential to access
large, quality real estate assets.
Beneficial Ownership: Diversified Risk and Rewards
DSTs allow you to purchase beneficial ownership interests in a
variety of real estate assets such as multifamily properties,
industrial distribution centers, and net lease buildings. This
beneficial ownership structure allows investors the potential to
diversify DST holdings across multiple asset classes, geographic
regions, and DST sponsor firms*.
*Diversification does not guarantee returns and does not protect
against loss.
Professional Management of Real Estate Assets:
Delaware Statutory Trusts (DSTs) utilize professional real
estate management companies (DST sponsors like Cove Capital
Investments) to oversee and maintain properties within the DST
trust. These management professionals are responsible for tasks
such as property maintenance, tenant relations, rent collection,
financial reporting, and strategic planning. In this way, DSTs
allow investors to step away from the active management headaches
and the day-to-day challenges associated with "Tenants, Toilets,
and Trash."
Potential Risks of Delaware Statutory Trusts
In addition to the pros, the Delaware Statutory Trust also has
some potential cons as well. Therefore, it is essential that
investors be aware of the potential risks of DSTs before investing
in one.
Delaware Statutory Trusts (DSTs) are a popular legal ownership
structure for holding title to real estate assets. There are many
benefits of the DST structure that make it a popular investor
strategy for many real estate investors.
Illiquidity:
One of the greatest potential risks of DSTs involve the illiquid
nature of them. After all, DST 1031 properties are real estate, and
like all other types of real estate, they are inherently illiquid.
In addition, because DSTs are made up of a beneficial ownership
structure, investors should be able and willing to hold their
investment in a DST 1031 property for the full life of the program,
which could last for 4 to 7 years or even longer.
Property-Specific Risks:
DST 1031 properties are real estate and contain the same
risks that all other forms of real estate entail. All
forms of real estate investing, whether buying rental homes,
duplexes, apartment buildings or commercial properties are
speculative and involve a high-degree of risk. They are considered
speculative because there are no guarantees with real estate
investing. Delaware Statutory Trust 1031 properties, similar to all
other types of real estate an investor may own on their own, are
subject to the risks of increased and ongoing vacancy, tenant
bankruptcies, problematic tenants, economic downturns, physical
damage, and unexpected maintenance issues.
It's essential for investors to thoroughly research and
understand the risks associated with investing in DSTs, and to
consult with financial and legal professionals who can provide
guidance tailored to their individual circumstances and risk
tolerance.
Delaware Statutory Trust: A Potentially Potent Investment
Tool
While Delaware Statutory Trusts (DSTs) offer investors a
powerful tool to augment their real estate strategies, this real
estate investment strategy may not suit every investor's needs.
DSTs have the potential to offer investors an array of benefits,
including tax advantages, hands free ownership, access to higher
quality properties, and diversification. However, it is equally
important for investors to read each DST offerings Private
Placement Memorandum (PPM) which will provide a full overview of
the business plan and risk factors of the investment, because
afterall, Delaware Statutory Trust investments, like real estate
you would own on your own, do contain risk.
About Cove Capital Investments
Cove Capital Investments is a DST sponsor company providing
accredited investors access to 1031 exchange eligible Delaware
Statutory Trust properties as well as other real estate investment
offerings. The Cove Capital team consists of Acquisitions, Asset
Management, Accounting, In-House Counsel, Investor Relations,
Marketing and Capital Markets. Cove Capital maintains a robust
current inventory of DST and private equity real estate offerings
potentially available to investors. Cove Capital Investments
has sponsored more than 1.9 million square feet of 1031 DST and
real estate offerings in the multifamily, net lease, industrial and
office sectors.
For further information, please visit
www.covecapitalinvestments.com or contact Cove Capital at (877)
899-1315 and via email at
info@covecapitalinvestments.com.
*Past performance is no guarantee of future
results. *Diversification does not guarantee returns and does
not protect against loss. *Preferred return is not
guaranteed and is subject to available cash flow.
This material does not constitute an offer to sell nor a
solicitation of an offer to buy any security. Such offers can be
made only by the confidential Private Placement Memorandum (the
"Memorandum"). Please read the entire Memorandum paying special
attention to the risk section prior investing. IRC
Section 1031, IRC Section 1033 and IRC Section 721 are complex tax
codes therefore you should consult your tax or legal professional
for details regarding your situation. There are material
risks associated with investing in real estate securities including
illiquidity, vacancies, general market conditions and competition,
lack of operating history, interest rate risks, general risks of
owning/operating commercial and multifamily properties, financing
risks, potential adverse tax consequences, general economic risks,
development risks and long hold periods. There is a risk of loss of
the entire investment principal. Past performance is not a
guarantee of future results. Potential cash flow, potential returns
and potential appreciation are not guaranteed. By visiting
the covecapitalinvestments.com site, other
affiliated portals, or corresponding on pages here within, you are
opting for communications on behalf of Cove Capital Investments, or
its affiliated companies. Securities offered through FNEX
Capital, member FINRA, SIPC.
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SOURCE Cove Capital Investments