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Pros and cons of the Delaware Statutory Trust 1031

For those who have not met this term before, the 1031 exchange is a straightforward strategy that many investors nowadays use, since it allows them to defer taxes while exchanging properties that are like-kind or similar to each other in terms of value. Although it is a very popular method used today, the Delaware Statutory Trust 1031 comes with a series of both advantages and disadvantages, and below in this article the most important ones are exposed.

Pro – deferral of taxes

As it was earlier mentioned, the DST 1031 allows investors to defer certain taxes on the condition that the investment property they want to exchange is equal in terms of value as the replacement property they have found. In most cases, taxes that come with selling or buying an investment property can be quite high, but in the case of exchanges, they can be significantly adjusted and reduced.

Pro – more money for investments

Since taxes are deferred, you will benefit from more money that you can use in other purposes and investments. This gives you more power and extra leverage to acquire one or more properties that have higher investment benefits compared to the situation in which you would have sold a property, paid the taxes and bought a new one instead.

Con – it may be difficult for those who do not live in the region where they exchange properties

One disadvantage of the 1031 exchange strategy is related to the rules and regulations it comes with, in the sense that for people who have their residency in another city or region than the location of the replacement property may find it difficult to understand local regulations and laws related to the Delaware Statutory Trust. However, one good solution to this problem is to work with a professional real estate who has vast knowledge in this domain and can guide you through the entire exchange process.

Con – losses are not recognized

It is known that this strategy allows you to defer any applicable taxes, yet it is worth mentioning that losses can also be deferred. In the case of a windfall profit year, chances are that if you defer losses which are considered to have quite large offset profits, you will make one very bad move that can seriously affect your finances. It is essential to weight very carefully he benefits that come with this type of deferral in order to ensure you end up making the best decision.

All things considered, these are some of the most important pros and cons that come with the Delaware Statutory Trust 1031. In case you consider such exchanges are far beyond your duties, it is mandatory that you resort to the professional help of an experienced and trust-worthy real estate agent. Do some online research and make a list of the most reputed ones in your region. Check their years of experience in the industry, whether they are licensed or not and what makes them different from the others available on the market. By following these steps, you are guaranteed with great results.

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