Potential Drawbacks of a 1031 DST Exchange


1031 DST investors give up control. 

Some investors want and need to have complete property management control.

The 1031 DST properties are illiquid. 

Anyone purchasing a 1031 DST must assume that their investment is not liquid.

Costs, fees and charges. 

While different exchange types have similar exchange costs for the Qualified Intermediary (QI), attorney, tax advisor etc., a DST is a private placement security that is purchased through a FINRA Registered Representative, who is paid a commission on the sale of this investment.

You must be an accredited investor. 

With a 1031 DST you must qualify as an accredited investor-an individual having income that exceeds $200,000 singly (or $300,000 with spouse) in each of the last two years, with reasonable expectations of the same income in the current year… or has a net worth of over $1,000,000 alone or with spouse (excluding the equity of that person's primary residence).

You cannot raise new capital in a 1031 DST. 

Once the DST offering is closed, there can be no future contributions to the DST by any current or new investor. The "reserve fund" can help with less major unexpected expenses when they occur.

Small offering size. 

Because many DST offerings are smaller in nature $10-$75 million-they have a tendency to fully subscribe and close quickly. DST offerings can stay open a few days or months depending on the capital raise.

DSTs must adhere to strict prohibitions. 

Our national sponsors, we partner with, have thoroughly met these prohibitions for you… the seven are as follows:
  • ·         The DST can't renegotiate existing loans or borrow more funds.
  • ·         The DST can't reinvest proceeds from the sale of its real estate.
  • ·         The DST is limited to making minor, nonstructural capital improvements, in addition to those required by law.
  • ·         Any cash reserves held between income distribution dates can only be invested in short term debt obligations.
  • ·         All cash and other reserves must be paid out to investors.
  • ·         The DST can't renegotiate existing leases or enter into new leases.



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