You’re likely well aware that as the effects of environmental degradation and climate change become more apparent each and every year, the movement toward sustainability also becomes stronger. Even in real estate investing, there has been an increased demand for green properties that have minimal environmental impact and promote sustainability. With this in mind, investors are now looking for assets that combine financial performance and environmental sustainability.
There are a few avenues you can take if you’re an investor who wants to generate steady returns while also supporting green developments, and one of these options is the Delaware Statutory Trust (DST).
Green real estate is property that is designed, built, or retrofitted to minimize negative impacts on the environment. There are various industry standards that fall under the “green” category, but the overarching features of these buildings include energy efficiency, net-zero emissions, and resource conservation.
To achieve these objectives, property builders, owners, and managers usually incorporate the following systems and more.
While there is no single governing body that labels a property as “green,” several entities can provide third-party certifications that help investors and other stakeholders assess a property’s environmental performance. Examples are the Leadership in Energy and Environmental Design (LEED) or ENERGY STAR certifications.
Why should modern investors include green real estate in their portfolios? Here are a few reasons why this approach is a powerful strategy.
There’s a growing tenant demand for sustainable buildings, with many companies and individuals choosing assets that have green features. A savvy investor would understand that there’s an opportunity from these trends. As tenants choose sustainable buildings, there’s a higher chance of long-term occupancy and stronger rental income.
The use of renewable energy sources and energy-efficient systems goes beyond lowering carbon emissions. Buildings also save on utility payments, which reduces overall operating costs. By extension, the DST keeps more of its income, resulting in higher potential income for those who own beneficial interests.
Investing in sustainable assets through a DST allows individuals to align their financial goals with their values. By supporting buildings that reduce carbon emissions and conserve resources, you contribute to larger environmental objectives while earning potential returns.
Investing through a DST lets you access the inherent benefits of the investment vehicle. You enjoy passive income, and tax deferral when paired with 1031 exchanges.
DSTs allow investors to pool funds together in exchange for beneficial interests. The capital can then be used to acquire various green buildings, some of which may include institutional-grade assets. As the properties under the portfolio generate income, the cash is distributed to the investors holding interests.
These structures are also 1031 exchange-eligible, so you can defer capital gains taxes while shifting into eco-friendly real estate. For those who want exposure to high-performing, environmentally responsible assets without direct management, DSTs offer a seamless entry point.
As the demand for sustainable properties grows, investing in these assets increases the chances of maximum income returns and long-term appreciation. Accessing these properties through a DST becomes a powerful option as this method also provides advantages like passive income, tax deferral, and professional management. If you’re looking to diversify into green real estate, DSTs serve as a strategic tool for this next step in your investment journey.
Sources:
https://www.weforum.org/stories/2024/01/sustainable-office-buildings/
https://www.energystar.gov/about/how-energy-star-works/energy-star-certification