So long blue states, hello red states. There are rich states and there are poor states. As an income property owner, no matter where you may live, (DST) Delaware statutory trust companies and the investment products they provide now give you the opportunity to maximize your returns potential in terms of income and potential appreciation. When suitable, this is done by focusing your replacement property search on rich states such as: Texas, Florida, Arizona, Nevada, Tennessee and Utah while avoiding the poor ones like: California, New York, New Jersey, Connecticut, Illinois and Minnesota, in my opinion.
At first glance, this may seem counterintuitive. The ‘poor states’ are some of the most densely populated and highly developed in the nation. How can this be possible you ask? This is because I believe successful income property owners invest in the future, not the past. Therefore, we are focusing on each state’s economic outlook rather than track record.
According to Arthur B. Laffer, author of the eponymous Laffer Curve,“over the past decade, about 3.5 million Americans on net have relocated from the highest-tax states to the lowest-tax ones. Since 2007 Texas and Florida (with no income tax) have increased by nearly 2.5 million residents, while California and New York have lost more than 2.2 million residents.”
The composition of this migration is also important to potential Delaware Statutory Trust investors. This mass exodus is being catalyzed by punitive taxation and delusional liberal politicians whose only response is to soak property owners and tax payers even more. Therefore, from a socio-economic standpoint, this is largely a movement of high-income earners and their money. The exact opposite of the Depression Era dustbowl migration so vividly depicted in John Steinbeck’s Nobel Price winning novel “The Grapes of Wrath.”
In large part these are highly trained and compensated individuals bringing their skills and affluence with them. I believe the ripple out from this will be enormous. They will demand more, better housing, increased goods and services and provide for greatly improved and increased community infrastructure. The take away from this for real property investors is obvious.
This compares very favorably to the decayed and teetering infrastructure in states such as California, Illinois, New York and New Jersey. Not only is the infrastructure crumbling in these ‘poor states’ but the basic services government exists to provide are increasingly lacking.
There is actually a direct inverse relationship between a state’s aggregate tax burden (New York, New Jersey, Connecticut and California being some of the highest) and the quality of public services they provide. Texas, a no income tax state, is ranked number one in the nation in terms of infrastructure quality and accessibility (CNBC’s annual ranking of the best and the worst states for business 2019).
Talent begets more talent; capital attracts more capital and increased opportunity feeds on itself. This cycle will continue spiraling up in rich states and down in poor. This is why credible Delaware statutory trust companies focus their dst properties for sale in the “smile states.” This is the crescent of low/no tax – right-to-work states that occupy the southern tier of the United States. Starting in no-tax Florida, they sweep westward to no-tax Texas and low tax Arizona. These are also opportunities to be had along the Rocky Mountain spine. Cities like Denver, Salt Lake and Boise also benefit from this trend. If you as an income property investor wish to benefit from Delaware statutory trust advantages; Git while the gittin’s good.
This material and views are prepared solely by the author and does not necessarily represent the views of the its affiliates. Statements concerning financial market trends are based on current market trend, which will fluctuate. Projections are inherently limited and should not be relied upon as an indicator of future results. Historical figures and performance are not indicative of future results. This is for informational purposes only and does not constitute an offer to buy or sell any investment.
DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. There are risks associated with investing in Delaware Statutory Trust (DST) and real estate investment properties including, but not limited to, loss of entire principal, declining market value, tenant vacancies and illiquidity. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated.
Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This information is not meant to be interpreted as tax or legal advice.
For more information on DST properties, contact us:
Peregrine Private Capital | Lake Oswego
5000 Meadows Road, Suite 230
Lake Oswego, Oregon 97035