EASE OF IDENTIFICATION
WITHIN 45 DAYS
A 1031 investor has 45 days to identify replacement property from the date their relinquished property is sold. This is a very short amount of time, particularly if an investor is trying to re-invest in a heated market where properties are receiving multiple offers. Once an offer is accepted, it still needs to be inspected and financed. If the property falls out of escrow the investor must find another property immediately or pay the capital gains.
DST 1031 properties are pre-packaged (pre-financed/inspected/purchased) before they are offered to 1031 investors. This feature helps to mitigate the closing risk faced by investors when doing a 1031.
Pre-Financed: The DST sponsor is able to leverage their strong lender relationships to seek financing terms investors would most likely not be able to obtain on their own. The DST assigns the benefits of the debt but retains the obligations. The debt is non–recourse to the investor. With the DST an investor does not need to qualify for the debt personally.
Pre-Inspected: The appraisal, environmental reports and property condition reports have all been completed prior to an offering being made available to 1031 investors.
Pre-Purchased: The sponsor closes on the property (or portfolio) before the offering is made available to 1031 investors. This mitigates the risk of a property falling out of escrow and getting stuck having to pay the tax.