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Welcome to Delaware Statutory Trusts (DSTs)

Imagine buying an institutional grade apartment community or other type of property with up to 500 other investors located in a high population and job growth location in a business-friendly state!

Rexco DSTs

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of available
Rexco 1031 DSTs

Options to buy with others

DSTs are legally formed trusts designed to accommodate up-leg 1031 investors (those looking to use proceeds from a sale and defer all taxes due). Most DST investors have owned management intensive properties for many years and have enjoyed great appreciation in the value of those properties. DSTs were approved by the IRS in 2004 and provide an outstanding solution for those wishing to sell and move into more passive investments.

The main benefits of DSTs.

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Diversification
You can divide up your investment amount onto multiple into DSTs, which may provide a more diversified real estate portfolio with a mix of property types and locations. For example, your portfolio could include apartments in Virginia and Florida, and necessity-based retail and healthcare in Texas and Tennessee. Let us put together a diversified portfolio for you based upon your risk tolerances.
Limited personal liability

Loans to acquire and maintain the property are non-recourse to the investor. The DST is the sole borrower.

Access to institutional-quality property

DSTs typically purchase “institutional grade” properties, or larger and newer assets which are typically bought by pension funds and large asset managers. Most individual real estate investors can’t afford to own these assets but the DST allows partial ownership.

Scheduling safety

DSTs can be closed in a matter of days which provides a great insurance policy if another purchase falls through for any reason.

Buying power in growth markets

Buying properties in high job and population growth states that have no income taxes are attractive to investors.

Estate Planning
All 1031 exchange investments receive a step-up in cost basis so your heirs will not inherit capital-gain liabilities.  The DST provides heirs with professional management without the ongoing burden of hands-on management.  One structure to consider is purchasing 3 different DSTs if you have 3 heirs. Then, once you pass away, each heir can decide separately what they will do with their investment.
“Swap until you drop”

The DST structure allows the investor to continue to exchange real properties over and over again, continually deferring taxes until the investor’s death – after which they pass tax free to the investor’s heirs.

Ease of Ownership
No management responsibilities – DSTs are managed and run by experienced “sponsors” or operators. They handle management, underwriting, purchase and sale of the asset.  You have no rent collection, no tenant’s meetings and little to no effort to maintain the property. You simply receive monthly income plus your pro-rata share of any appreciation upon sale of the property.
Eliminate “boot” risk

Any remaining profit on the sale of your relinquished property is considered “boot” and subject to tax. Use the DST structure to defer all the gains, or use it to “fill up” remaining boot from another purchase.

Debt Matching

If you have a current loan outstanding on the property you plan to sell, you must have a similar amount of debt on the acquiring property. DSTs provide great flexibility of debt allocation and have solutions for properties with no debt all the way up to 80% leverage.

Risk factors when considering DSTs

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Diversification

Diversification is not a guaranty to eliminate risk.  DSTs are fundamentally real estate investments and may be subject to volatility in the entire real estate asset class.  Also investing in different regions may open up regional risks associated with local economies, natural disasters and other unforeseen circumstances.

Limited personal liability

Some DSTS have loans and they are typically non-recourse to the DST as well.  In the event of a poor performing asset, the DST may be under no obligation to pay the mortgage loan if cash flow does not cover debt service in which case the DST may stop making payments and risk foreclosure which would wipe out your investment.

Access to institutional-quality property

A newer asset or institutional asset is not a guaranty of success.  Newer assets have little or no track record and due to possibly high development cost may require higher rents to cover the costs and service debt if any.  If higher rents are not competitive it could result in high vacancy and rental income insufficient to cover operating costs and debt service.

Scheduling safety

There is the possibility of the DSTs available at the time of your requirement not meeting your needs.

Estate Planning

Tax laws can change at any time, and estate plans using current laws may require changes in the future.  Certain situations may often be grandfathered in, but there is no guaranty. With no hands-on management, you give up control. Not all DSTs perform the same and investing in more than one may result in varied performance.

“Swap until you drop”

Tax laws could change.  If properties do not appreciate in value, it may be difficult to execute 1031 Exchanges.

Ease of Ownership

Without any say in the management or decisions on capital improvements, sale or refinance of the asset you have no control.  It may be very difficult to sell if you experience unexpected changes in life circumstances.

Eliminate “boot” risk

If your “boot” is very small, there may not be any DSTs accepting very small investments.

Debt Matching

Leveraged investments are subject to additional risks, including, but not limited to: foreclosure risk, lender requirements for maintenance, interest rate volatility, balloon risk, and more.

McDermott Investment Services is a national Delaware Statutory Trust (DST) and Tenants in Common (TIC) company.  We provide access to a marketplace of DSTs and TICs from over 25 different sponsor companies.McDermott’s team members have years of real estate transaction and 1031 experience and have participated in billions of dollars worth of DST Investments.

Registered Representative of McDermott Investment Services, LLC A Registered Broker Dealer, Member FINRA, SIPC.  Investment Advisory Services offered through McDermott Investment Advisors, LLC An SEC Registered Investment Advisory. Any information provided has been prepared from sources believed to be reliable but is not guaranteed, does not represent all available data necessary for making investment decisions and is for informational purposes only. This information is intended only for residents of the state of California.

This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please read the entire Memorandum paying special attention to the risk section prior investing.  IRC Section 1031, IRC Section 1033 and IRC Section 721 are complex tax codes, so therefore you should consult your tax or legal professional for details regarding your situation.  There are material risks associated with investing in real estate securities including illiquidity, vacancies, general market conditions and competition, lack of operating history, interest rate risks, general risks of owning/operating commercial and multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks and long hold periods. There is a risk of loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, potential returns and potential appreciation are not guaranteed.