DST investments are typically illiquid, with investors unable to readily sell or exchange their shares before the DST's dissolution or end of its term.
The value of the properties held by the DST can fluctuate due to market conditions, potentially affecting the trust's performance and the returns to investors.
Investors in a DST have no control over the management or decision-making of the trust, relying entirely on the DST sponsor or manager to handle the property and trust affairs.
Changes in interest rates can affect real estate values and the cost of borrowing, potentially impacting the DST's profitability and the value of its properties.
The DST's performance is often tied to the economic conditions of the specific sector or location where its properties are situated, making it vulnerable to localized downturns or sector-specific challenges.
DSTs often use leverage (debt) to acquire properties, which can increase returns but also raises the risk, especially if refinancing becomes necessary under less favorable terms.
Changes in real estate or tax laws can impact the benefits of investing in DSTs, particularly those related to 1031 Exchanges and capital gains tax deferral.
The trust's success heavily depends on the DST sponsor's expertise and management. Poor management or financial instability of the sponsor can jeopardize the investment.
The income of DST properties, particularly those reliant on commercial tenants, can be affected by tenant solvency, lease renewals, and market demand for rental space.
While DSTs offer diversification within their property portfolio, investors might be overly concentrated in real estate and should consider balancing their overall investment portfolio.
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