Let's Ask Katie machoskie - may 2024

By: Katie Machoskie

Hi Katie, 

We own a few investment properties, but we’re getting tired of the maintenance issues and difficult tenants. How can we reduce our capital gains if we don’t want to sell and buy another property? - Mark W. in Newport Beach

 Hi Mark, 

Your question is very popular these days!  You are not alone, and many investors find being a landlord more challenging than they had expected.  

I’d suggest you consider selling a rental property and investing the proceeds in a Delaware Statutory Trust (DST).  Your financial advisor or CPA can provide you with more information and an opinion if this is the best option for your situation.  A DST can offer numerous benefits for property owners. One major advantage is the potential for diversification. By selling a single rental property and investing in a DST, investors can gain exposure to multiple properties across different geographic locations and asset classes. This diversification can help spread risk and reduce the impact of any single property's performance on the overall investment. Additionally, DST investments often provide passive income and potential tax advantages. Rental property owners who are looking to step away from the active management of their real estate holdings can benefit from the passive nature of DST investments. Selling through a 1031 Exchange will allow you to defer capital gains taxes on the sale of your rental property by reinvesting the proceeds in a DST, allowing for potential tax-deferred growth of your investment. DST investments typically offer professional asset management, which usually provides investors access to institutional-quality properties and management expertise that may not be achievable with a single rental property. 

Bottom line: Selling a rental property and investing in a DST can offer benefits such as diversification, passive income, potential tax advantages, and professional asset management, making it a compelling option for property owners seeking to optimize their real estate investments.

Katie Machoskie is a REALTOR (DRE#01380037) and Founder of the Machoskie & Associates team at COMPASS in Orange County. With over 21 years of experience, she has sold over $1.23 billion. She and her team of neighborhood specialists are ready to assist you anywhere in Orange County and Los Angeles.

Have a question? Email her at katie.machoskie@compass.com, and be sure to follow her on Instagram @machoskiehomes.com and visit www.machoskiehomes.com.