As an investor, you probably get really excited when you hear about new and different investment opportunities. You want to know all there is to know about these opportunities as quickly as possible so that you can jump on them and possibly add them to your portfolio. While it is certainly exciting to hear about DST 1031 properties, you will want to know some of the pros and cons of this kind of investment.
A New Long-Term Investment to Add to Your Portfolio
Diversification is the name of the investing game. You need a healthy mix of short-term and long-term investments to create ongoing profits for you for years. A 1031 DST exchange property is exactly that; a long-term investment. You are plugging dollars into co-ownership of a real estate property with the intent of collecting profit on that property somewhere down the road in five to ten years. The co-ownership means that you do not have any financial responsibilities to said property as a landlord would and that other DST 1031 investors receive profit from the same property. It is a sort of "share the wealth" investment in that regard.
Minimum Investment with Smaller Cash Loan
To buy into this kind of investment, you are required to invest starting at $100,000, but you can borrow fifty percent of that amount to get started. Additionally, because you are buying into real estate without full ownership of a property, you still reap the rewards of "owning" real estate. You can borrow against the value of the property in order to reinvest in more properties or other investments.
You Can Lose a Lot of Money
A lot can happen to a property in five to ten years. A tornado, fire, or flood could destroy it. Renovations or remodeling meant to upgrade the value of the property could fail and drive the value down. You might lose a lot of money before you could make any money on your monetary investment, and you have zero say in what happens to the property.
You Have Zero Say in What Happens to the Property
Because you are more or less a silent co-owner of the property and backing it as an investment until the property is sold, you have zero say in what happens to the property. So, if the landlord of the property chooses to level a building or add to the estate, you cannot stop these changes from happening. Changes directly impact whether the investment succeeds or fails for you, and not being able to control how and what happens to the property can be extremely stressful and frustrating.