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7 Benefits of All-Cash DSTs

We’ve all heard the saying “cash is king.” Today we’ll take a look at the benefits of all-cash DSTs. While an all-cash DST isn’t for everyone, there are some advantages in terms of security and flexibility when compared to DSTs with leverage.

Let’s dive into 7 reasons why we like all-cash DSTs…

1. No Foreclosure Risk

With an all-cash DST there is no foreclosure risk, the trust owns the property free and clear. There is no risk of losing the property to the lender.

2. No Refinancing Risk

Debt markets can change, with an all-cash DST there is no risk of having to refinance and qualify for a new loan when the term is up.

3. Vacancy Won’t Sting as Much

Without having to make debt payments, a tenancy issue is much easier to navigate.

4. No Interest Payments

Over the course of holding a property, interest payments could equal a significant amount. With an all-cash deal, there are zero interest payments.

5. Appreciation Benefits

With no interest payments, when an all-cash property is sold, there is no remaining debt to pay off. All appreciation is realized, and that money can go to the investor instead of the bank.

6. Hold Period Flexibility

With an all-cash DST, the trust is able to hold the property through market downturns. This creates the ability to sell the property at the opportune time to maximize profits.

7. More Conservative Investment for Direct Cash Investors

Direct cash investors can take advantage of an all-cash DST if they are opposed to the risks associated with a leveraged DST.

All-Cash DSTs and Your 1031 Exchange

Like we said, an all-cash DST isn’t for everyone. If you are completing a 1031 exchange, it’s important to follow the “equal or greater” debt guidelines. To completely defer taxes owed on capital gains, your replacement property acquisition cost must be equal to or greater than the value of your exchange funds. The value of your exchange funds typically represents the equity, the debt and any profits earned from the sale of a relinquished investment property.

Debt reduction in a 1031 exchange is considered boot because additional value is received by you, the investor, rather than putting the entire value of the relinquished property into the replacement property. Reducing your debt liability, in effect, is an increase in income, which is taxable. 1031 exchanges defer taxes on such income only if it is reinvested into a replacement property. Some investors will diversify their exchange funds into DSTs with various loan-to-value ratios. At 1031 Crowdfunding we can create a custom blend ensuring all of your exchange funds are properly invested so that you have a completely tax-deferred exchange.

We take great pride in the level of detail and transparency we offer our clients before making any investment decision. Our main goal is to provide an investment that offers preservation of principal, predictable income, and the potential for appreciation. Give us a call today if you’d like to learn more about all-cash DSTs and how they could potentially fit into your real estate investment portfolio.

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This material does not constitute an offer to sell or a solicitation of an offer to buy any security. An offer can only be made by a prospectus that contains more complete information on risks, management fees and other expenses. This literature must be accompanied by, and read in conjunction with, a prospectus or private placement memorandum to fully understand the implications and risks of the offering of securities to which it relates. As with all investing, investing in private placements are speculative in nature and involve a degree of risk, including loss of your principal. Past performance is not necessarily indicative of future results and forward-looking statements and projections are not guaranteed to achieve the results described and your actual returns may vary significantly. Investments in private placements are illiquid in nature and there may be no secondary market or ability to sell the investment should the need for liquidity arise. This material should not be construed as tax advice and you should consult with your tax advisor as individual tax situations will vary. Securities offered through Capulent, LLC, member FINRA, SIPC.