At our firm, we always emphasize to clients the importance of having a financial plan to stick to and why they shouldn’t let short-term market gyrations influence their long-term investment decisions. Certainly, recent volatility has raised concerns about the stock market’s strength, but it is worth remembering that the strong performance we’ve seen over the last several years has benefited investors.*

For investors considering a 1031 Exchange or Opportunity Zone (OZ) investment, thorough and thoughtful due diligence has probably never been more important than it is today. With 1031 Exchanges (and especially DSTs) along with OZ investments growing in popularity, the industry is seeing a lot of new offerings as well as new sponsors entering the space.

In 2017, the new federal tax law created Opportunity Zones with the goal of directing investment, development, and improvement in distressed communities around the United States. An Opportunity Zone is defined by the IRS as an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. As you may expect, Opportunity Zones are now, rightfully, getting a lot of attention.

It has always been a part of my investment philosophy that by appropriately utilizing “alternative” investments in conjunction with more traditional asset management strategies, we can better help our clients reach their financial goals. To me, an alternative investment is really any investment that does not fall in the typical stock, bond, or cash box.

In previous posts I have written about the merits of the Delaware Statutory Trust (DST) and how this popular securitized investment vehicle may help individuals complete their property exchanges and ultimately, achieve their financial goals. I have also addressed the risks associated with investing in real estate and the unique risks related to DSTs.

In this article, I highlight the fees involved when investing in DSTs, with the intent of bringing context to the DST fee structures so that investors are better informed.

A 1031 Exchange allows an investor to sell a property, reinvest the proceeds in a new property, and potentially defer all taxes that would have been due on the sale. Every 1031 Exchange is different and needs to be navigated carefully and specifically based on the needs of the client.

I recently helped a family of three siblings navigate a 1031 Exchange. This particular exchange is a great example that not only is every exchange unique, but also how the DSTs (Delaware Statutory Trusts) can be  put to use in a variety of ways and allocations.

When tax reform passed Congress last year, 1031 exchanges pertaining to real estate were spared major changes in legislation. This often under-looked yet tax-advantaged solution is potentially one of the most powerful tax planning and wealth preservation strategies available to investors.

Millennials make up the largest segment of renters and it isn’t just because they are the largest generation alive. It’s also because they are renting longer. There is no doubt that millennials are greatly impacting the current housing market. According to Zillow, the median age of today’s renter is 32 and the average income is less than $50,000. With high debt from student loans, it has become even more difficult for this generation to save for a down payment on their own home.

Tenants in Common (TIC) and Delaware Statutory Trusts (DSTs) are both viable structures to implement multi-owner real estate offerings when completing a 1031 exchange. However, there are several key distinguishing characteristics.

We at Chicagoland 1031 Exchange often talk about the potential benefits of using a Delaware Statutory Trust (DST) as replacement property to complete 1031 exchanges. It’s true that DSTs have become a popular vehicle for 1031 exchange investors, with good reason. But it’s prudent for us to recognize that, although DST investments have a lot of positive features and are often an appropriate investment channel, they may not be a good fit for every investor.