DST vs TIC
Was interested in hearing feedback on practical differences that exist between DST and TIC structures. Anyone have experience with a firm that has worked through both structures and has a preference for one over the other?
Was interested in hearing feedback on practical differences that exist between DST and TIC structures. Anyone have experience with a firm that has worked through both structures and has a preference for one over the other?
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I have some limited experience. Off the top of my head, here are some things with regard to DSTs:
If you're looking for expert advice on this topic, PM me and I can forward you the name of a rare DST expert with whom I met several times in summer 2016. It's a pretty complicated business and most of the stuff you read on google is very topical and, frankly, mostly propaganda from the DST industry. To really understand this stuff, you will actually need to talk to a real originator/manager of the DST product.
Edit: And what's funny is that one of the more prominently displayed articles on DSTs is from an attorney that I know. He wrote the article several years ago and, last I looked, it gets prominently displayed in the Google search; however, he readily admitted to not having the hands-on experience to competently advise on the topic. So that's why you should take what you read on Google with a grain of salt with regard to this product.
Oh yeah, I forgot about this one. In a regular 1031 exchange, you have to take on equal to or greater debt than on your current property to adjust for "mortgage boot." With a DST you can simply 1031 exchange for the net proceeds of your real estate sale. That makes life sooooo much easier.
Example:
Net sales price: $10,000,000 Loan payoff: $6,000,000 Net proceeds: $4,000,000
That $4M is transferred into a DST. With a regular 1031 exchange, you are required to carry new debt of at least $6M.
Also, from what I recall, the sweet spot of a DST is between $1 and 20 million. For transfers above $20 million, it will take some planning with your DST rep to identify the assets. But under $20 million is pretty liquid (i.e. pretty easy to find the assets within a week).
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