How Control Works in a Typical DST
According to Derek, most DSTs place the sponsor firmly in charge. The sponsor manages the property directly or outsources the management, and they ultimately make the decisions. Investors do not control the property. They are usually locked into the deal for four to seven years, with the sponsor running all operations until the DST eventually sells.
How Appreciation Homes Works as a Master Tenant
In the structure Derek describes, Appreciation Homes is the master tenant. Investors own the property outright. Appreciation Homes leases it from them. This is different from a DST because the property owner is still the owner on title and holds the property itself, not a fractional interest inside a trust.
The owner does not need to think about breaking the lease or replacing the master tenant. Derek notes that there is no need for that. Investors can sell the property any time they want with the lease still in place, which provides a level of control that is not available in a typical DST.
A Quadruple Net Lease for Added Protection
Derek highlights another key difference: this master lease is not a triple net lease, it is a quadruple net lease. Appreciation Homes covers the roof and any structural issues in addition to the other expenses typically included in net leases. This shifts more responsibility away from the property owner and reduces unexpected costs.
What Happens If the Master Tenant Disappears
Derek explains that even in the unlikely event that Appreciation Homes were to disappear, the investor still owns the property. The property would most likely still have a subtenant in place because Appreciation Homes operates as the master tenant in a sublease structure. That way investors have an additional backstop for rental income continuity and prevents them from having to rush to find a new tenant.
Predictable Rent Every Month
Under this plan, the owner receives rent every month whether the property is occupied or vacant. As the master tenant, Appreciation Homes is responsible for the rent regardless of whether a subtenant is in place. So investors can always count on having a stable income, which can be valuable for owners preparing for a future 1031 Exchange.
Moving Forward With More Control and Stability
The Appreciation Homes master lease model provides many benefits for investors, such as stable income, direct ownership, and more flexibility than a typical DST. For those who looking to maintain full control over their investment, establish predictable income, or prepare for a future 1031 Exchange, this option is definitely worth exploring.
If you have questions about whether a master lease from Appreciation Homes might benefit your own 1031 Exchange planning, reach out to the team at Equity Advantage today.
The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.
