This calculator is designed to give you a quick snapshot of whether it makes more sense to keep your rental properties or to sell, use a 1031 exchange, and move your equity into a DST (Delaware Statutory Trust). While there are many factors to consider when making such a decision, this tool focuses specifically on cash flow, helping you evaluate your current return on equity. It won’t capture everything—like appreciation or tax implications—but it provides a helpful starting point for understanding how your money could be working for you.
Disclaimer: The information provided by this calculator is for educational and informational purposes only. It does not constitute financial, investment, or legal advice. The results are estimates based on the inputs provided and may not account for all relevant factors or market conditions. Before making any financial decisions, you should consult a licensed professional or perform your own thorough due diligence. We assume no liability for any decisions made or actions taken based on the use of this calculator.
Equity refers to the difference between the market value of a property and the amount of debt still owed on it. For example, if your rental property is worth $500,000 and you owe $300,000 on the mortgage, your equity is $200,000. Over time, as property values increase and mortgages are paid down, equity can grow, providing a significant source of wealth for property owners.
Return on Equity (ROE) is a measure of how effectively your equity is working for you. It’s calculated by dividing your annual net income by the current equity in the property. For rental properties, this includes income from rent minus expenses like maintenance, taxes, and insurance. For a DST's (Delaware Statutory Trust), ROE is driven by the distribution you receive from the pooled investments.
A 1031 exchange allows you to sell a rental property and reinvest the proceeds into another property or a DST, all while deferring capital gains taxes. This can be particularly useful if you want to transition from active property management to more passive income streams, like a DST, without taking a big tax hit. By using a 1031, you can preserve more of your equity to generate cash flow, making it an attractive option for those looking to maximize returns and reduce management responsibilities.
DST's typically offer cash flow returns in the range of 4-5% per year. Additionally, DST's benefit from property appreciation over time, which can result in total returns of around 10-12% annually. Unlike direct rental property investments, DST's offer passive income, as they are managed by professional firms, making them attractive for investors looking for steady returns without active involvement in property management.
Appreciation and Taxes: The calculator does not account for property appreciation or income taxes, which can significantly impact overall returns. It's important to consider these factors separately when analyzing the long-term performance of your portfolio.
Cash Flow: When comparing cash flow from rental properties and DST's, always factor in any fees associated with management, maintenance, or other services. This ensures you're comparing net cash flow, giving you a clearer picture of actual returns.
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