DST has enabled many investors to acquire properties through ownership rights of properties owned by the trusts. Investors must do their research before investing in DST properties to maximize their returns. It would help if you considered the below before committing to a DST investment.
Availability of funds to make installments
Before committing to a DST, you need to be sure that you will be able to honor installments when they fall due. This is because the installment payments will increase if you fail to make payments in time or miss payments entirely. For example, DST charges a 5% penalty if an installment payment is made after the 20th day of the month. You must also understand that your right to be part of future offerings will be affected if you default on your payments for two consecutive months. Furthermore, there is no provision for installment deferral in cases where you cannot make your payments.
Validity of initial installment
The initial installment is the first payment you make as a DST investor and should not be affected by unforeseen circumstances like selling or changing your investment plans. You must understand that any changes in the validity of the first installment will affect all other installments for this property and future properties.
Commitment to invest in future offerings
When committing to a DST, you must understand that your right to be part of future offerings will be affected if you default on your payment for two consecutive months or fail to honor your initial installment. Suppose you do not qualify for the next offering, and the seller decides to sell its ownership rights in this offering to another investor. In that case, your chances of acquiring DST properties will be affected.
Determine how much you can afford
Since the minimum initial installment is $500, investors need to determine before making their commitment whether or not they need the properties offered by DST. If you cannot afford the initial installment, it is better to ask yourself whether DST is the suitable investment for you.
Risk of market fluctuations
The value of properties offered by DST may vary at every offering, depending on factors such as occupancy rate, affordability index, and government regulations that affect rent increases. The best way to determine the value of a property is to analyze how much return you stand to make on your investment. It is, therefore, important for investors to assess before making their commitment whether they can afford to take this risk.
Interest rates
When committing to a DST, investors need to determine whether the interest rate offered by the DST is suitable. You may be charged a higher interest rate if you fail to pay installments on time or when you miss payments altogether. For example, DST charges a 5% penalty if an installment payment is made after the 20th day of the month. This will affect the higher interest rates that will be charged on your future installments.
In conclusion, before committing to investing in a DST, you need to ensure that you have done your research and have your finances ready.
