The Role of Due Diligence in DST Investments

While investing, every investor wants to be sure that his or her money into safe hands. This becomes more crucial when we are talking about complex real estate transactions. When you are investing in DST (Delaware Statutory Trusts) for 1031 exchange, due diligence is quite necessary.

Here we discuss how to do a proper inspection in this type of investment.

Structural review

You must get the assistance of an experienced attorney for reviewing documentation for the transaction. An attorney will make sure they are no errors in the documents. You will also come to know about any clause that might affect you at later stages.

Analysis of sponsors

You must go through the financial condition, performance record, experience, and backgrounds of the sponsors involved in the property.

Property inspection

Check the physical condition of the property before making an investment. All make sure that the performance of the property is similar to that of other properties in the region.

These inspections make the Delaware Statutory Trust-relatedreal estate investments successful. One needs to understand some market risks are always associated with DST. 

If you are planning for a 1031 exchange, contact the representatives from FAI Exchange to know more about the process. Apart from helping you find the DST investments for this process, you can take the support of the company for finding a qualified intermediary. We will also guide you through the entire process.

Find out more about this company here. You can email your queries on wlm@snetinvest.com or give a call on (888) 669-3332. You need to register on the website to get access to latest DST offerings.

Important Rules On 1031 Transactions

If you are a real estate investor, the chances are that you are aware of the role of Section 1031 for saving taxes. It lets you defer capital gains tax on real estate transactions. To enjoy the benefits of this Section, you have to comply with regulations as implemented by IRS.

Through this blog post, we discuss some rules of Section 1031 you must know as an investor.

No exceptions for the deadlines

If you are unable to complete the transaction as per the time frame, you are supposed to pay the tax on capital gain. For example, if you fail to close the purchase within 180 days, you can’t enjoy the benefits of Section 1031.

45 days to identify purchases

After selling your property, you get 45 days for identifying potential purchases. You are allowed to identify three properties in this period, provided you buy one of them.

Transaction must be qualified

This means the property you are selling must have been used for investment purposes.  You have to hold the property for passive income.

Properties should not be held by different owners

The 1031 exchange is applicable only if the same owner sells the replacement property and buys the relinquished property. If you purchase the property through an LLC and sell one using a personal name, the exchange will be invalid.

If you are a real estate investor from Massachusetts, you can defer capital gains tax by taking the support of FAI Exchange. This firm helps you in DST investments, which can act as replacement properties in exchange.

Read more about the services of FAI Exchange here.