Case Study for Delaware Statutory Trusts
The case study below is merely provided to demonstrate the 1031 process and potential benefits. Each investor’s experience may be different and past performance is not an indication of future performance. All investing involves risk of loss of some or all principal invested.
Trust Investment Summary
In 1998, Karen and her husband Bob purchased a 12-unit apartment building in San Francisco, California, for $480,000. In March 2021, they sold the property through their real estate broker for roughly $3.3 million.
Their decision to sell the property stemmed from Bob’s impending retirement, coupled with their desire to get away from the responsibilities of active management along with the rules and regulations associated with being a landlord in the state of California. Moreover, they aspired to broaden the scope of their investment portfolio beyond one property in a single location and also hoped to generate more cash flow from their investments.
When their property closed escrow, Karen and Bob embraced the opportunity to invest in Delaware statutory trusts (DSTs). They partnered with our team of qualified professionals to outline a 1031 exchange plan comprised of institutional-quality, professionally managed DSTs that would enable them to defer all capital gains taxes and achieve their investment objectives.
For Karen and Bob, it was “Mission Accomplished.” They successfully completed their 1031 exchange and now own an interest in seven different DST properties with an aggregate value of over $1.2 billion. Their real estate portfolio is now diversified across various sectors, geographic locations, tenants, income sources, and more.
Most importantly, their real estate portfolio is now hassle- and property management-free, which permits them to pursue other, more enjoyable interests.
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31351 Rancho Viejo Road
San Juan Capistrano,
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Not an offer to buy, nor a solicitation to sell securities. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing. Any information provided is for informational purposes only. Securities offered through Arkadios Capital, member FINRA/SIPC. Advisory Services offered through Arkadios Wealth. Perch Wealth and Arkadios are not affiliated through any ownership.
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- There’s no guarantee any strategy will be successful or achieve investment objectives;
- All real estate investments have the potential to lose value during the life of the investments;
- The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
- All financed real estate investments have potential for foreclosure;
- These 1031 exchanges are offered through private placement offerings and are illiquid securities. There is no secondary market for these investments;
- If a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
- Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits;
- Tax benefits are not guaranteed and are subject to changes in the tax code.