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Stable income after legal settlement
See how an investor turned a large legal settlement into stable, growth-oriented income by leveraging DSTs—discover the strategy, tax benefits, and smart diversification approach that unlocked a 9% after-tax return and future capital gain potential.
Landlord fatigue to strategic growth
Learn how a multi-generational family escaped tenant headaches, rising costs, and stagnant returns by transitioning their rental properties into four distinct DSTs—gaining improved cash flow, reduced management stress, and a streamlined path to long-term growth and generational wealth.
Increased income and freedom
Discover how a hands-on landlord approaching retirement gained an extra 2% income—while shedding the stress of repairs and tenant headaches—by transitioning his real estate into a DST. Learn how he unlocked greater returns, personal freedom, and peace of mind.
Leveraging a DST Strategy for Stable Income and Growth After a Legal Settlement
Investor Background:
The client, a seasoned professional, had just emerged from a lengthy legal dispute, receiving a substantial cash settlement as a result. They were seeking a secure, stable source of income that would provide tax-efficient benefits and long-term wealth preservation.
Primary Concern:
With after-tax funds available for reinvestment, the investor wanted to maximize income while minimizing tax liability, seeking alternatives that would outperform traditional fixed-income investments.
Key Metrics:
* Return on Investment: By combining investments across different DSTs and a REIT, the investor secured an initial return of 5.41%, with annual income increases projected.
* Net After-Tax Income: Factoring in tax efficiency and depreciation, the client was able to realize an effective 9% after-tax income from the DST investments, significantly outperforming other fixed-income assets.
* Depreciation Benefits: The use of depreciation on the DST investments enhanced the net income derived from the properties, allowing the client to keep more of their distributions.
The client needed a financial solution that would:
* Generate consistent, stable income in the short term.
* Offer tax efficiency by mitigating the tax impact on the settlement.
* Provide long-term capital appreciation through a diverse investment portfolio.
* Avoid the high volatility of the stock market while producing above-average returns.
After consulting with Investment Support Services, the investor was introduced to the concept of Delaware Statutory Trusts (DSTs), which presented an attractive opportunity for tax-deferred and passive real estate investment.
The investor implemented a diversified approach by utilizing a combination of three separate DST funds and a Real Estate Investment Trust (REIT). This strategy enabled the investor to:
* Achieve Stability: DSTs offered the client the opportunity to own institutional-grade commercial real estate properties, providing regular income distributions.
* Maximize Tax Efficiency: Even after the settlement was taxed, the DST structure allowed for depreciation benefits, effectively reducing the taxable income on the net distributions received.
* Leverage Future Capital Gains: The client was able to defer potential future capital gains taxes, further preserving wealth for future reinvestment.
Results:
* The client achieved stable, predictable income through quarterly distributions from the DST investments, which was critical for maintaining their desired lifestyle post-settlement.
* The annual increases in returns offered peace of mind and confidence in long-term growth potential.
* The tax advantages of the DST allowed the client to reduce taxable income, even with after-tax money, thus maximizing the net cash flow.
* By diversifying between multiple DSTs and a REIT, the investor was able to balance capital preservation and income generation, while maintaining flexibility for future reinvestment.
Conclusion:
This case demonstrates how DSTs can serve as a powerful solution for investors seeking passive income, tax efficiency, and long-term growth following a significant cash event, such as a legal settlement. By strategically diversifying across multiple DSTs and a REIT, the investor was able to secure a 9% after-tax income and ensure capital appreciation over time, all while benefiting from the depreciation inherent in real estate investments. This approach not only provided the stability the client sought but also created opportunities for future tax-deferred growth.
From Landlord Fatigue to Strategic Growth
Investor Background:
A multi-generational family owned several rental properties, dealing personally with tenant issues, escalating insurance premiums, and costly maintenance.
Primary Concern:
Despite owning multiple rentals, the family’s net proceeds were continually eroded by ongoing expenses. They sought increased cash flow, exposure to Class A assets, and an efficient method to transfer wealth to heirs.
Challenge:
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Tenant & Maintenance Burden: The family handled all repairs and tenant concerns, which proved time-consuming and unpredictable.
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Rising Costs: Property insurance and upkeep costs kept climbing, eating into profit margins.
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Lack of Diversification: Their existing rentals were concentrated in one geographical area and property type, leaving the family exposed to local market fluctuations.
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Succession Planning: A seamless vehicle was needed for passing assets on to the next generation without the complexities of direct real estate management.
Solution:
After evaluating their portfolio, we recommended the family transition their property holdings into Delaware Statutory Trust (DST) investments. Specifically, we diversified their capital across four distinct real estate sectors, each offering professional property management and potential for stable cash flow and appreciation:
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Student Housing – Class A student-centric developments near major universities.
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Industrial Centers – Strategically located industrial properties servicing logistics and distribution.
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Multi-Family Housing – Well-located apartment communities with strong occupancy rates.
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Industrial Business Park – Flexible-use facilities accommodating various manufacturing and warehouse tenants.
This approach allowed the family to leverage institutional-grade assets, benefit from passive income streams, and reduce day-to-day management burdens.
Results:
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Increased Cash Flow: By shifting to professionally managed DSTs, the family realized higher net distributions, no longer diluted by excessive insurance and maintenance costs.
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Portfolio Diversification: Multiple asset types and markets reduced risk and positioned the family for steady appreciation, even if one sector experienced fluctuations.
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Reduced Management Burden: Tenant relations and property upkeep are now handled by experienced management teams, allowing family members to focus on other priorities.
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Enhanced Succession Planning: The DST structure simplifies ownership transfer to heirs, providing continuity and removing the operational hassles tied to direct property ownership.
Conclusion:
By reallocating their traditional rental properties into four distinct DST investments, this family effectively boosted cash flow, reduced management stress, and created a well-rounded real estate portfolio with multiple avenues for growth. With professional management in place, they can now enjoy improved work-life balance while preserving a legacy that can be smoothly passed on to future generations.
Transitioning a Long-Time Landlord to a DST for Increased Income and Freedom
Investor Background:
A blue-collar, hands-on real estate owner with a portfolio of residential and commercial properties. For decades, the client personally handled all repairs, maintenance, and property improvements. As he approached 65 years of age, he realized he had no succession plan in place for managing his properties and no longer wanted the responsibility of doing the work himself.
The client faced several key challenges:
• Lack of a Succession Plan: With no clear plan for passing on property management duties, the client was concerned about what would happen to his real estate portfolio as he aged.
• Physical and Emotional Burnout: After years of personally managing repairs and tenant issues, he was fatigued and desired more personal freedom.
• Income Stability: While his properties generated income, managing them came with increasing risks, such as vacancies, unexpected repairs, and tenant turnover, which made the income less predictable.
Primary Concern:
The client was seeking a way to transition into a more passive role while ensuring stable income and preserving the value of his real estate investments.
Solution:
After performing a free analysis of his portfolio, we introduced the client to the concept of Delaware Statutory Trusts (DSTs). The analysis revealed that by transitioning his properties into a DST structure through a 1031 exchange, the client could achieve higher income while gaining the freedom from hands-on management.
Key benefits of the DST strategy included:
• Increased Income: The analysis showed that by reinvesting the proceeds from his property sales into DSTs, the client could achieve an additional 2% in annual returns over what he was making as a landlord.
• Passive Ownership: The DST allowed the client to transition from active management to a completely passive role, eliminating the day-to-day headaches of repairs, tenant management, and property maintenance.
• Diversification and Stability: The client could now own fractional interests in institutional-grade commercial properties with professional management, reducing the risks associated with owning a few individual properties.
Results:
• Increased Income: The client saw an immediate 2% increase in returns over his previous earnings, thanks to the DST structure’s efficient income distribution and stable tenant base.
• Personal Freedom: By transitioning into a DST, the client was able to fully retire from property management, enjoying his newfound freedom to pursue personal interests without the stress of managing tenants or making repairs.
• Reduced Risk: The DST provided greater stability with long-term leases and professional property management, offering more reliable and predictable income compared to the risks of individual property ownership.
• Succession Planning: The DST also offered the client flexibility for future succession planning, as the assets could easily be passed on to heirs without requiring active management on their part.