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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.

The short-term month-to-month nature of self-storage leases permits leases to be reset to market rates quicker than most other real estate leases leading to an inflation hedge.

Many people conflate the concepts of real estate investing and passive income. Real estate can be a form of passive investing, but often not in the ways that investors think.

It can be argued that there has never been a time in history when the 1031 exchange has been more critical to preserving wealth for property owners than today. The US has experienced tremendous capital growth, and real estate owners are now sitting on an unprecedented amount of equity. Additionally, landlords in major growth areas like California are potentially feeling the squeeze of state and local regulations as they look to exit for more landlord-friendly states.

To analyze commercial real estate investments, analysts will put together a spreadsheet (also called a “model”) that takes into consideration all of the numbers associated with a particular project.