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The concept of the “Seven Deadly Sins” of a Delaware Statutory Trust (DST) refers to specific activities that a DST sponsor must avoid to maintain the trust’s tax-advantaged status under IRS Revenue Ruling 2004-86. These restrictions are crucial for ensuring the DST qualifies for 1031 exchange purposes. In some ways, these rules force sponsor transparency and limit the opportunity for a sponsor to mismanage an asset. However, it can also be restrictive, limit upside potential, and pose challenges for certain investments. Below is a critical examination of these seven prohibitions:

Imagine you sell a property and need to reinvest the proceeds into a new property to qualify for the 1031 exchange benefits. The challenge arises when you can’t find a suitable replacement property that uses the full amount of your exchange proceeds. In such cases, any leftover equity can become a “boot,” which is subject to capital gains taxes. This is where DSTs come into play.

Debt can be a powerful tool in real estate investment, enabling investors to leverage their capital and acquire properties that would otherwise be out of reach. However, whether through traditional mortgages, commercial loans, or more complex financial instruments, the use of debt in real estate can introduce significant dangers that must be carefully managed. From cash flow constraints and refinancing challenges to foreclosure risks and market volatility, understanding the potential pitfalls of debt is crucial for any investor.

In a 1031 exchange, ensuring a successful transaction is crucial to avoid significant tax liabilities. If an exchange fails, the investor may face up to 30%-40% in state and federal taxes, along with depreciation recapture and other taxes. To mitigate this risk, savvy investors often identify multiple properties as potential replacements. The IRS provides guidelines to help investors structure their identification process effectively.

Investing in a Delaware Statutory Trust (DST) has gained popularity among real estate investors, especially those looking to defer capital gains taxes through a passive 1031 exchange investment. However, despite its allure, there are several reasons why one should exercise caution before committing to this type of investment. A quality 1031 advisor should educate investors on the reasons why one should think twice before investing in a DST, not just the potential benefits.

When comparing investment structures like Delaware Statutory Trusts (DSTs) and Tenancy-in-Common (TICs), it’s crucial to examine several key factors, including liquidity, certainty of close, tax reporting, financing structure, and associated costs and fees. Both DSTs and TICs allow multiple investors to own fractional interests in larger properties, yet they differ significantly in how they handle these aspects. Understanding these differences can help investors make informed decisions about which structure best suits their investment goals and risk tolerance.

Congress is cooking up a refreshed version of the Opportunity Zone program—call it OZ 2.0—with a slate of investor-friendly updates that could make the next wave of OZ investing more flexible, more accessible, and may be a welcomed injection of opportunity for real estate investors

Congress is cooking up a refreshed version of the Opportunity Zone program—call it OZ 2.0—with a slate of investor-friendly updates that could make the next wave of OZ investing more flexible, more accessible, and may be a welcomed injection of opportunity for real estate investors

RealtyMogul, a leading online platform used to invest in high quality commercial real estate, today announced the unveiling of the RealtyMogul 1031 Concierge Program as part of its ongoing strategy to offer investors diversified real estate investment opportunities.