How DST Cash Flow Works: Monthly vs Quarterly Distributions

MARCH – DSTs FOR RETIREMENT + INCOME SERIES

Intro­duc­tion

We con­tin­ue with the series on DSTs for retire­ment. The tim­ing of cash flow mat­ters for retirees and income-focused investors. The pro­jec­tion for dis­tri­b­u­tions on DSTs typ­i­cal­ly is sched­uled for a month­ly, quar­ter­ly, or semi-annu­al­ly basis depend­ing on the trust agree­ment. 90% of the DSTs we review project to send dis­tri­b­u­tions on a month­ly basis. 

March 20, 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

Investors may direct dis­tri­b­u­tion (nor­mal­ly ACH) to spe­cif­ic accounts. Some investors may also direct dis­tri­b­u­tion to char­i­ta­ble foun­da­tions as part of a poten­tial Qual­i­fied Char­i­ta­ble Dis­tri­b­u­tion (QCD). We are not pro­vid­ing tax advice and are not CPA.

Dis­tri­b­u­tion Mechan­ics

Income from a DST is clas­si­fied as pas­sive income. The income is derived from rents minus expens­es. Near­ly 65 per­cent of DST by design are struc­tured with non-recourse debt. This is to sat­is­fy one of the §1031 require­ments of replac­ing debt. There are a lim­it­ed num­ber of DST offer­ings that do not pay dis­tri­b­u­tions and apply dis­tri­b­u­tion to reduc­ing the out­stand bal­ance on the non-recourse loan. This struc­ture is ref­er­enced as zero (mean­ing zero dis­tri­b­u­tion). One of the struc­tured advan­tages of the zero would be increased poten­tial tax favored posi­tions espe­cial­ly with high LTV cou­pled with cost seg­re­ga­tions and 100% depre­ci­a­tion. The pay­ments each indi­vid­ual investor receives are pro­por­tion­al to per­cent­age of own­er­ship. Investors receive a ben­e­fi­cial inter­est in the DST. Fre­quen­cy and amount depend on lease struc­ture and occu­pan­cy. There are asset class­es that oper­ate on a triple net struc­ture. The ref­er­ence NNN would indi­ca­tion a triple net struc­ture.

Month­ly Dis­tri­b­u­tions

The pro­ject­ed month­ly dis­tri­b­u­tion can pro­vide pre­dictable cash flow. The dis­tri­b­u­tion may align with pro­ject­ed liv­ing expens­es. This may reduce reliance on oth­er income sources. There are always mar­ket con­di­tions that may affect poten­tial dis­tri­b­u­tion.  In lever­aged, DSTs mort­gage pay­ments are made pri­or to dis­tri­b­u­tion. Typ­i­cal­ly, month­ly dis­tri­b­u­tion is made approx­i­mate­ly 10 days after the close of the month.

Quar­ter­ly Dis­tri­b­u­tions

If the DST dis­trib­utes on a quar­ter­ly basis the income may vary with sea­son­al income. Hos­pi­tal­i­ty assets may reflect a dif­fer­ence in dis­tri­b­u­tions. This may allow spon­sor flex­i­bil­i­ty for reserves or cap­i­tal improve­ments. Cap­i­tal improve­ments are typ­i­cal­ly reviewed in the pri­vate place­ment mem­o­ran­dums (PPM).

Investor Con­sid­er­a­tions

Advi­sors should review investors’ suit­abil­i­ty for gen­er­al and spe­cif­ic align­ment of investor goals as well as DST focus. Nor­mal due dili­gence should check the offer­ing mem­o­ran­dum for pay­out sched­ule. There is also the need to con­firm tax report­ing respon­si­bil­i­ties. Spon­sors (trustees) are typ­i­cal­ly respon­si­ble for deliv­er­ing annu­al report­ing to all investors. Advi­sors and investors need to under­stand poten­tial impact of debt ser­vice or vacan­cies may affect the dis­tri­b­u­tions. Recent­ly the deliv­ery of mul­ti­fam­i­ly units in cer­tain parts of the coun­try has cre­at­ed chal­lenges for cer­tain prop­er­ties. The abnor­mal deliv­ery was cre­at­ed as a result of the COVID shut down prompt­ing build­ing.

One of the biggest struc­tur­al events in mul­ti­fam­i­ly his­to­ry was the post-COVID apart­ment deliv­ery wave. If you’re in real estate or invest­ing, this peri­od is usu­al­ly called the “post-pan­dem­ic sup­ply wave” or “deliv­ery tsuna­mi.” COVID cre­at­ed a demand shock (espe­cial­ly with migra­tion to more open states). This prompt­ed devel­op­ers to over­build. Cou­ple that with cheap mon­ey in 2021 every­one start­ed at once and fin­ished at once. The units were deliv­ered all at once in 2023–2025. Now that sup­ply is reduced. Based on the needs for hous­ing it may be too soon to state that the sup­ply is col­laps­ing again. In future post we will ful­ly ana­lyze the indi­vid­ual asset class­es.

Con­clu­sion

Know­ing how cash flow is struc­tured helps investors plan bud­gets and align expec­ta­tions, ensur­ing DST income fits retire­ment needs.

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.