For those of you looking for yield, check these out.
They’re kinda like a “mini-REIT”. Where REIT’s may own 50 properties, and their NAV is in the billions, DST’s are more likely to own 6-7 properties, and the NAV will be $40-50m.
They don’t own giant shopping malls or 60-story office buildings, but rather, they own the local Walgreens, Tractor Supply Company, student dorms, or storage buildings.
Why I like them:
- You can 1031 into them, whereas you can’t with a REIT. (A 1031 is a tax-free exchange. You don’t recognize LTCG on the sale of a property as long as you roll the proceeds into a new property.)
- Once you get ready to sell, you can continue to 1031 for ever and ever, amen. (Until you die, that is. Then you get a step-up in basis.)
- High cash flow, a lot of which isn’t taxed. I recently saw an offering that projected 5.5%, and about 40% of that was tax-free, due to returns of capital, depreciation, etc.
- Just like any real estate portfolio, they can be fairly well diversified, both by their geographic location and their tenant’s industry. (Well, as diversified as 6-7 properties can be.)
The bad thing: _ They are extremely illiquid. _ Whereas you can sell a traded REIT anytime, and you can sell a non-traded REIT once a quarter, you can never ever get out of these things until the trust has run its statutory life. And the lives tend to be 7-8 years long. So you may not be able to get out of this investment for 7-8 years.