Prepared by Al DiNicola
Private Fund Advisor | 1031 Exchange & DST Specialist
What is a Delaware Statutory Trust (DST)?
A Delaware Statutory Trust (DST) is a legal structure that allows multiple investors to own fractional interests in institutional-grade real estate. For 1031 exchange purposes, DST interests are recognized by the IRS as direct ownership in real estate.
Why are DSTs commonly used in 1031 exchanges?
DSTs provide a simple, passive solution for investors looking to defer capital gains taxes while transitioning out of active property management. They are especially useful when timing, identification, or management concerns arise.
What types of properties do DSTs invest in?
DSTs typically invest in high-quality, income-producing properties such as:
- Multifamily apartment communities
- Industrial and logistics facilities
- Medical office buildings
- Net-leased retail (credit tenants)
- Self-storage facilities
What are the primary benefits of DST investing?
- Passive, hands-off ownership
- Access to institutional-quality real estate
- Potential for stable income
- Diversification across multiple properties
- Estate planning advantages, including potential step-up in basis
What are the risks?
All real estate investments carry risk. Key DST considerations include:
- Illiquidity (limited ability to sell early)
- Market fluctuations
- Interest rate sensitivity
- Tenant and occupancy risk
- Reliance on the sponsor’s management
How much income can I expect?
Most DST offerings target annual distributions in the range of 4%–7%, depending on the property type and market conditions. These are projections and not guaranteed.
What is the minimum investment?
Minimums typically range from $100,000 to $250,000 per DST offering, depending on the sponsor.
Can I invest in more than one DST?
Yes. In fact, many investors choose to diversify across multiple DSTs to reduce risk across asset types, geographic regions, and sponsors.
What happens at the end of the investment?
DSTs generally have a hold period of 5–10 years. At the end of the hold:
- The property is sold
- Investors can either take proceeds (and pay taxes) or complete another 1031 exchange
- Some DST offer opportunity to execute a 721 UPREIT
Can I access my money early?
DSTs are designed as long-term investments. There is no established secondary market, so early liquidity options are extremely limited.
How is financing handled in a DST?
Many DSTs include non-recourse financing. Investors receive their proportional share of debt, which helps meet 1031 exchange requirements.
Are there restrictions within DST structures?
Yes. To maintain 1031 eligibility, DSTs must follow IRS guidelines that limit:
- New capital contributions
- Loan renegotiation
- Major capital improvements
- Reinvestment of proceeds
How are DST investments taxed?
- Income is generally taxed as ordinary income
- Depreciation may offset a portion of taxable income
- Capital gains can be deferred through a 1031 exchange
- Estate planning may allow for a step-up in basis
What is the role of the sponsor?
The sponsor is responsible for:
- Acquiring the property
- Structuring the investment
- Managing operations
- Executing the business plan
Sponsor quality is one of the most important factors in DST investing.
What happens if the property underperforms?
Performance depends on market conditions, tenant stability, and management execution. While DSTs are typically structured conservatively, they are still subject to real estate market risks.
Who should consider a DST?
DSTs are generally well-suited for investors who:
- Want to transition out of active property management
- Are completing a 1031 exchange
- Seek passive income
- Value diversification and estate planning strategies
A Note from Al DiNicola
DST investing is not just about selecting a property—it’s about aligning your investment with your tax strategy, income goals, risk tolerance, and long-term plan.
My role is to help you:
- Navigate the 1031 exchange process
- Evaluate sponsor quality and risk
- Structure a diversified DST portfolio
- Make informed, confident decisions
Let’s Discuss Your Strategy
If you are considering a 1031 exchange or want to explore DST opportunities, I’m here to help guide you through every step.
Al DiNicola
Private Fund Advisor
Delaware Statutory Trust Specialist