A triple-net (NNN) lease investment offers numerous benefits, including hands-off involvement and steady income, making it a popular choice for many modern investors. The most direct way to access this investment is through direct ownership; however, did you know that other methods offer additional benefits?
Entering the NNN property through a Delaware Statutory Trust (DST) is one option — an investment vehicle that can own several NNN assets and even provide tax-deferral benefits. In this article, Realized 1031 shares the top DST NNN strategy and how you can leverage it for your next investment. Let’s take a closer look!
A DST is a legal entity that owns underlying real estate property. To enter one, you need to purchase beneficial interests. Once you do, you earn monthly income distributions based on the performance of the properties under the DST.
These trust entities often own multiple assets across various sectors. Some focus on NNN assets, which allow the DST to enjoy the same benefits as a direct property owner. In this case, the DST won’t need to handle property taxes, insurance premiums, and maintenance costs of the underlying assets. The tenants handle these expenses, and the DST simply receives monthly income, which is then distributed to the beneficial partners or investors.
The main reason why investors opt for DSTs is the tax deferral benefits. This happens when an investor enters the DST through a 1031 exchange, which is the main transaction that allows for tax-deferral benefits.
As mentioned, the main reason why investors invest in NNN leases through DSTs is the tax deferral benefits. Delaying tax liability helps you preserve more of your wealth so you can continue growing your equity, which is especially appealing to those who have highly appreciated properties.
Beyond tax deferral, DSTs offer several additional benefits to investors.
NNN leases still require you to maintain property oversight. In a DST, the sponsor handles this task for you. This means that DST NNN investments are truly passive.
DST sponsors are often composed of teams with extensive experience in the real estate industry. While NNN leases restrict their capabilities as landlords, they’d still have the expertise and resources to handle major capital improvements or negotiate favorable lease terms.
DSTs typically own several properties, and so being part of the DST means you also earn income from these underlying assets. Compare this structure to direct ownership, which only lets you earn income from one property at a time, since purchasing several requires significant capital. Even better, DSTs often acquire institutional-grade assets, which typically have higher income than other types of properties.
DST triple net investing works as a powerful tool mainly because of the tax deferral benefits. As you delay these payments, you keep more of your wealth and ensure that your equity works for you. Plus, NNN properties under DSTs provide additional benefits like professional management and truly passive income. DST NNN investments are thus a worthy consideration for investors who are planning for long-term financial success.
Sources:
https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx