Delaware Statutory Trust (DST) Investor FAQ

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

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This website is neither an offer to sell nor a solicitation of an offer to buy any security which can be made only by a prospectus, or offering memorandum, which has been filed or registered with the appropriate state and federal regulatory agencies, and offered only by broker dealers and registered investment advisors authorized to do so. The information found in this website is a summary of general information intended for training and education of accredited investors only who are conducting research on DST type investments and or a 1031 Exchange. Any offer of securities is qualified in its entirety by its own offering documents. A prospectus, or offering memorandum must be preceded or accompanied by any offer of sale and read in conjunction with the offering documents in order to understand fully all the implications and risks of an offering to which it relates. Terminology such as "we", "us" and "our" is used as defined in the offering documents and does not imply DST News viewpoint. On a non-subscription fee basis, DST News provides informational resources and training to accredited investors regarding DST type investment products and offerings. DST News is not affiliated with any sponsor of such investments but may be associated with the offer or sale of such investments. This websites information above does not constitute any offer to sell any securities, or represent an express or implied opinion on or endorsement of any specific investment opportunity, offering, issuer or sponsor. Copyright DST News © 2020. All Rights Reserved.