Case Study: Retiring Landlords Who Exchanged into DSTs

MARCH – DSTs FOR RETIREMENT + INCOME SERIES

Intro­duc­tion The famous slo­gan (clos­ing line) from Naked City was: “There are eight mil­lion sto­ries in the naked city. This has been one of them.” That line was deliv­ered at the end of each episode and became one of the most icon­ic taglines in clas­sic tele­vi­sion his­to­ry. It reflect­ed the show’s focus on real­is­tic crime sto­ries set in New York City. There may not be near­ly that many exam­ples of Delaware Statu­to­ry Trust (DSTs) real-life exam­ples illus­trat­ing strat­e­gy more clear­ly than the­o­ry.

March 27, 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

As advi­sors we have engaged with investors at all stages of sell­ing their invest­ment prop­er­ties. Some before retire­ment and some after. There are a few com­mon threads among many investors.

Over the years we have inter­viewed and assist­ed retir­ing land­lords suc­cess­ful­ly tran­si­tioned out of their real estate hold­ings.  Some investors sim­ply paid the cap­i­tal gains. Oth­er investors became edu­cat­ed and moved into DSTs.

Sit­u­a­tion

Indi­vid­u­als as well as cou­ples (and investor groups) have owned and occa­sion­al­ly accu­mu­lat­ed real estate assets and port­fo­lios over the years. Here is an exam­ple. A cou­ple owned three rental prop­er­ties in the Mid­west. Unfor­tu­nate­ly, the prop­er­ties were high-main­te­nance and geo­graph­i­cal­ly spread out. This leads to con­tin­ued stress for the active land­lord who wish to be pas­sive land­lords. The cap­i­tal gains tax­es on sales could have been sig­nif­i­cant. There is depre­ci­a­tion recap­ture, cap­i­tal gains tax­es, NIT to be paid as well as state income tax in Cal­i­for­nia.

Strat­e­gy

As advi­sors we can only pro­vide an esti­mate of poten­tial cap­i­tal gains impli­ca­tion using sim­ply cal­cu­la­tions.  As always, we strong­ly sug­gest to engage with a CPA on a bet­ter esti­mate.  The investor decid­ed to enter into a 1031 exchange. The investor sold one of the prop­er­ties and used a §1031 exchange. The pro­ceeds, held by the qual­i­fied inter­me­di­ary (QI) as required, were used to invest­ed into two DSTs. The investor moved from own­ing one rental prop­er­ty into a mul­ti­fam­i­ly and indus­tri­al DST asset. The oth­er remain­ing prop­er­ties were put on the mar­ket and sold. As with the first prop­er­ty, the oth­er two prop­er­ties were exchanged into a mul­ti­state triple net prop­er­ty (NNN) port­fo­lio and a self-stor­age port­fo­lio. The investor received month­ly and quar­ter­ly pas­sive income dis­tri­b­u­tions. The main goal was to deferred cap­i­tal gains tax­es.

Out­come

The goal was for the land­lord to elim­i­nate stress. The retire­ment income replaced active rental income. The DST pro­vid­ed a diver­si­fied geo­graph­ic port­fo­lio as well as asset type diver­si­fi­ca­tion. In addi­tion, estate plan­ning was sim­pli­fied.  As well as all real estate assets there would be a step up in basis when the investor pass­es.  Albeit the heirs would need to wait until the spon­sor od the DST ini­ti­ates an exit strat­e­gy to sell the indi­vid­ual DSTs.

Lessons Learned

As men­tioned, many times we are not CPAs. Ear­ly plan­ning with a CPA and QI is crit­i­cal for suc­cess­ful exe­cu­tion of the 1031 exchange.  The CPA will cal­cu­late the poten­tial tax impli­ca­tion and if a 1031 exchange should be entered into. Engag­ing with an advi­sor who deals with DST on a reg­u­lar basis is imper­a­tive. The amount of due dili­gence mate­r­i­al may become over­whelm­ing but man­age­able. The DST spon­sor selec­tion mat­ters. Mul­ti­ple DST invest­ments can reduce con­cen­tra­tion risk. There is always a suit­abil­i­ty guide­line for invest­ing in a DST.  Since DSTs are illiq­uid (sim­i­lar to oth­er real estate) investors who need access to cash are not suit­ed for invest­ing in a DST.

Con­clu­sion

DSTs allowed this cou­ple to con­vert hard-to-man­age assets into pre­dictable retire­ment income, pre­serv­ing wealth and peace of mind.

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.