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Planning for Tough Times Ahead – a Tax-Free Move To” Higher Ground”

Mark owned 3 small hotels in in New York State for over 20 years.  He had inherited them from his father 30 years ago and run them ever since.   He never thought of selling the properties until he began to have concerns about a recession and didn’t want to have all his eggs in one basket if times got tough.  He didn’t want to pay tax on his gains, but felt it was time to get defensive.

We acknowledged his concern about the vulnerability of having most of his equity in one sector that could be particularly vulnerable in economic downturns.   After all, hotels don’t enjoy the stability of long-term leases.

Confident that we could use DSTs to provide him a ‘higher ground’ without incurring tax liability, Mark accepted an offer for all (3) properties in the amount of $7.5 million.    He had only $500,000 debt on the property but also a low tax basis of only $1million.

Using DST’s we curated a $7 million multi-sector portfolio consisting of A-grade multi-family developments, triple-net leased life science buildings, and a property leased long term to the Federal Government.   The portfolio more than covered his debt replacement needs and provided him a diversified recession resilient profile.   When the economic downturn did occur, his monthly checks came like clockwork, and he discovered the ancillary benefit of more free time to improve his golf game.