What is a Delaware Statutory Trust and Why Should You Care?

June 12, 2023 | Inside Scoop | By: The Goodhart Group

Tired of tenants? Tired of dealing with broken toilets and trash? Don’t want to pay capital gains on your residential or commercial properties you lease out? Recently we learned about alternative ways to defer paying capital gains taxes when selling an investment property using a Delaware Statutory Trust / 1031 Exchange. 

Through this program, instead of buying another investment property as you would in a traditional 1031 exchange in order to defer your taxes, you would put the proceeds from your sale into a Delaware Statutory Trust. The minimum investment is typically $100,000 and you can diversify your investments within the Trust which lowers the risk of your portfolio. Plus, you are not dealing with tenants or the other complications from being a landlord. 

Below are the top benefits:

  1. Capital Gains tax deferrals
  2. Provides a predictable Income
  3. Offers a diversified portfolio
  4. No maintenance on an investment property
  5. No long term commitment

The income part is what is really nice!  Especially if you would like to unlock your equity in your rental properties, this is a great way to give you a steady income without the hassle of tenants. It is classified as passive income or ordinary income.  The holding period in this type of investment is usually 7-10 years.  You can get your money out whenever you would like to invest it again in a like-kind property to avoid paying capital gains.  This works not only for residential but also for commercial properties. If you currently own an investment property and are interested in exploring if a Delaware Statutory Trust / 1031 Exchange is a good option for you, please reach out. We would love to chat with you about it more.