We’ve published several articles about Delaware Statutory Trusts (DSTs), including the advantages and disadvantages. DSTs let investors enjoy the potential benefits of real estate - rental income, appreciation, tax benefits - without having to have operational control or management of the property. We’re going to take another look at the pros and cons but in relation to debt-free versus leveraged DSTs.
Land is always eligible for a 1031 exchange and it’s a great investment - what matters is the taxpayer’s intent for the property. Do you intend to buy a vacant lot, develop it, and benefit from its sale after a tax-deferred exchange? If that’s your intent, then no. The IRS will deem this as intent to sell, not for investment or business purposes.
The Employee Retirement Income Security Act of 1974 (ERISA) introduced the individual retirement account. And, the IRA became popular with help from the Economic Recovery Tax Act of 1981. These days, IRAs are positioned to help individuals save for retirement, with tax-deferral advantages.
The Opportunity Zone Program was created to direct much-needed capital to distressed areas by offering tax deferral incentives to investors. The program is finite with many deadlines: the statutory expiration of Qualified Opportunity Zones’ (QOZ) designations is December 31, 2028. Additionally, 2028 will be the first year during which early QOZ investments can be sold, allowing investors to qualify for their 10-year gain exclusion.
*Update February 2019: Realized has established its Secondary Market and has completed its first Secondary Market transaction.
It should come to no surprise that Delaware Statutory Trusts (DSTs) carry many of the same risks as a direct property investment. After all, the underlying asset driving the investment’s performance is some type of real estate asset. From illiquidity to macroeconomic risks, such as rising interest rates, DSTs are exposed to a variety of similar factors that may spell trouble for any real estate investment.
Timing is everything in commercial real estate. Market fluctuations, supply and demand, the national economic outlook -- all factors well outside your control -- can positively or negatively affect property prices. A good deal today might not look as rosy six or 12 months down the road.
Finding a viable Qualified Opportunity Zone (QOZ) and Qualified Opportunity Fund (QOF) in which to invest your capital gains requires a great deal of thought, consideration, and research. Certainly, the tax deferral benefit is great, but you also need to consider the investment’s underlying real estate project, as well as the fund’s actual framework.
If you’ve read any of our previous blogs about the Qualified Opportunity Zone (QOZ) program, you should have come away with the following:
If you type the term “safe alternative investments” into a search engine, you’ll likely find that “real estate” comes out on top of many search results. However, if you input “safe alternative investments during a recession” into your search engine box, the results could be mixed.
What is Investment Property Wealth Management?
