Using DSTs to Create Passive Income in Retirement

DSTs FOR RETIREMENT + INCOME SERIES

Intro­duc­tion

Retire­ment plan­ning often requires shift­ing from active income to reli­able, pas­sive income streams. Active income typ­i­cal­ly comes from active man­age­ment of invest­ment prop­er­ty. For prop­er­ty own­ers, Delaware Statu­to­ry Trust (DSTs) allow investors to exchange active­ly man­aged real estate into pro­fes­sion­al­ly man­aged, income-gen­er­at­ing assets.

March 1, 2026

By Al DiNi­co­la, AIF®
Adinicola@namcoa.com
Pri­vate Fund Advisor/DST 1031 Spe­cial­ist
NAMCOA® — Naples Asset Man­age­ment Com­pa­ny®, LLC
Secu­ri­ties offered through MSC-BD, LLC, Mem­ber of FINRA/SIPC

How DSTs Gen­er­ate Pas­sive Income

Investors may enter into a DST via a direct cash invest­ment or most often from a Sec­tion 1031 tax deferred exchange.  Investors will (once invest­ed) own a frac­tion­al ben­e­fi­cial inter­est in the DST. Investors receive pro­por­tion­al dis­tri­b­u­tions from rental income based on the struc­ture of the DST.  There are cer­tain DST that are struc­tured in what is known as a “zero DST”.  The pri­vate place­ment mem­o­ran­dums (PPM) will describe the pro­posed tim­ing of dis­tri­b­u­tions typ­i­cal­ly month­ly or quar­ter­ly pay­outs depend­ing on the trust. There are no prop­er­ty man­age­ment respon­si­bil­i­ties

DST dis­tri­b­u­tions are typ­i­cal­ly net of expens­es, pro­vid­ing pre­dictable cash flow. There are DST that are struc­tured by design with non-recourse debt. This is an impor­tant ele­ment espe­cial­ly for investors who have debt being relin­quished when they sell their prop­er­ty and are involved in a §1031 exchange. To ful­ly com­ply with the §1031 exchange the investors need to replace the debt with new debt or fresh or new cash in order to match the replace­ment val­ue of the prop­er­ty relin­quished.

Retire­ment Advan­tages

There are ben­e­fits and advan­tages of many invest­ment struc­tures. The DSTs replace active land­lord income with­out stress (typ­i­cal­ly). The DST also reduces man­age­ment headaches and ten­ant issues. For some investors who want to con­tin­ue nego­ti­at­ing rents and being involved with inspec­tions and rental process, DSTs are not the solu­tion. How­ev­er, DSTs may align income with lifestyle goals. Depend­ing on the spe­cif­ic DST a spon­sor may per­form a cost seg­re­ga­tion study enabling addi­tion­al tax ben­e­fits for investors uti­liz­ing bonus dep­re­ca­tion.  Investors should seek advice from their CPA on how uti­liza­tion of 100% bonus dep­re­ca­tion may be ben­e­fi­cial.

Con­sid­er­a­tions

All invest­ments have pos­i­tive attrib­ut­es as well as draw­backs. DSTs are illiq­uid until the prop­er­ty sells. The sale (also ref­er­enced as exit strat­e­gy) is depen­dent upon the sponsor’s eval­u­a­tion of the mar­ket as well as tim­ing of any loans on the asset near­ing term. The cash flow depends on lease struc­ture and occu­pan­cy. Occu­pan­cies may ebb and flow depend­ing on sev­er­al fac­tors. Investors should review spon­sor his­to­ry. Advi­sors who are active­ly involved in DST may have a dis­tinct advan­tage on eval­u­at­ing spon­sors as well as offer­ings.

Con­clu­sion

For retirees seek­ing steady income with­out prop­er­ty over­sight, DSTs pro­vide a poten­tial tax-smart, hands-off solu­tion. When tis strat­e­gy is com­bined with the 1031 tax defer­rel exchange there may be addi­tion­al ben­e­fits.

NAMCOA® is a SEC reg­is­tered invest­ment advi­so­ry firm that pro­vides com­pre­hen­sive port­fo­lio man­age­ment, finan­cial plan­ning, and fidu­cia­ry deci­sion-mak­ing ser­vices on behalf of retire­ment plan spon­sors. Our Dif­fer­ence is sum­ma­rized by our fidu­cia­ry approach which enables us to bet­ter meet port­fo­lio and retire­ment plan objec­tives, result­ing in stronger risk adjust­ed returns for investors and peace of mind for Clients. We also focus on alter­na­tive real estate invest­ment. Many real estate investors are seek­ing tax deferred solu­tions uti­liz­ing §1031 exchanges or Oppor­tu­ni­ty Zones.

DSTs are not for all investors.  The acqui­si­tion of a DST is for accred­it­ed investors only.  Con­tact your invest­ment advis­er for addi­tion­al details on how a DST may be a solu­tion to your 1031 Exchange and suit­ed for your invest­ment future. For more infor­ma­tion on how to prop­er­ly set up an IRC 1031Tax Deferred Exchange or if you are an accred­it­ed investor and would like addi­tion­al infor­ma­tion on a DST con­tact Al DiNi­co­la at 239–691-8098 or email adinicola@namcoa.com.

This is not an offer to pur­chase or solic­i­ta­tion to pur­chase any secu­ri­ty, as such be made only through an offer­ing mem­o­ran­dum or prospec­tus.  Invest­ing in secu­ri­ties, real estate, or any invest­ment, whether pub­lic or pri­vate, involves risk, includ­ing but not lim­it­ed to the poten­tial of los­ing some or all of your invest­ment dol­lars when you invest in secu­ri­ties. You should review any planned finan­cial trans­ac­tions that may have tax or legal impli­ca­tions with your per­son­al tax or legal advi­sor.   NAMCOA, LLC is a Reg­is­tered Invest­ment Advi­sor, reg­u­lat­ed by SEC (Secu­ri­ties and Exchange Com­mis­sion). Our cor­po­rate office is locat­ed at 999 Van­der­bilt Beach Road, Suite 200, Naples Flori­da 34108. Secu­ri­ties Offered through MSC-BD, LLC, Mem­ber of FINRA/SIPC, 5 Cen­ter­pointe Dri­ve, Ste. 400 Lake Oswego, OR, 97035.  MSC-BD, LLC and NAMCOA are inde­pen­dent­ly owned and are not affil­i­at­ed.

Thank you.