Passive, fractional ownership of institutional real estate that qualifies as 1031 replacement property — professionally managed, debt pre-arranged, and accessible at lower minimums than whole assets.
A fractional interest the IRS treats as like-kind real property.
A Delaware Statutory Trust (DST) is a legal entity that holds title to one or more real estate assets on behalf of many investors. Each investor owns a beneficial interest in the trust rather than a deeded piece of the property, and the trust — through a professional sponsor — handles financing, management, and eventual sale. In 2004, IRS Revenue Ruling 2004-86 confirmed that a properly structured DST interest is treated as like-kind real property, making it eligible as 1031 exchange replacement property.
For investors selling appreciated real estate, that ruling is the whole point: a DST can absorb exchange proceeds — including the debt that must be replaced — without the investor signing on a new loan or managing a building. Minimums are typically $25,000 to $100,000, so a single exchange can be diversified across several DSTs, property types, and sponsors.
From sponsor acquisition to full cycle
Sponsor Acquires the Asset
A DST sponsor buys an institutional property (or portfolio), arranges any non-recourse financing, and places it into the trust before investors come in.
You Purchase Beneficial Interests
Through a broker-dealer, accredited investors buy interests via private placement memorandum, often using 1031 exchange proceeds within the 45/180-day windows.
The Sponsor Manages, You Receive Distributions
All operations — leasing, capital projects, lender relations — are handled by the sponsor and its asset manager. Investors receive their pro-rata share of cash flow, typically monthly.
Full-Cycle Sale or 721 Roll-Up
When the trust sells, investors can 1031 again into a new DST, exchange into a REIT via a 721 UPREIT, or cash out and pay deferred tax.
Sector yields at a glance
Average current distribution by DST sector
Going-in yield · current offerings · Source: Baker 1031 Master Listings (sponsor-projected)
Why exchangers choose DSTs
Truly Passive
No tenants, toilets, or trash — the sponsor runs everything. DSTs are popular with investors exiting active management.
Debt Comes Pre-Packaged
Non-recourse debt is arranged at the trust level, satisfying the 1031 requirement to replace debt without a personal loan application.
Diversification
Lower minimums let one exchange spread across sectors, geographies, and multiple sponsors instead of a single replacement building.
Backup-Strategy Fit
Because a DST can close quickly, it is widely used as an identified backup so an exchange doesn't fail at the 45-day mark.
What to weigh before investing
Illiquidity
DSTs are long-term, illiquid holdings — typically 5–10 years — with no public secondary market. Plan to hold to the sponsor's full cycle.
No Investor Control
The 'seven deadly sins' rules that protect 1031 status also prohibit investors from making management decisions; you are a passive owner.
Fees and Load
Syndicated DSTs carry sponsor, broker-dealer, and ongoing fees that reduce net return; compare load and projected distributions across offerings.
Market and Sponsor Risk
Returns depend on the sponsor's execution and on real estate fundamentals. Diversify across sponsors and read each PPM's risk factors.
DST vs. direct property vs. tenant-in-common (TIC)
| Feature | DST | Direct property | TIC |
|---|---|---|---|
| 1031 eligible | Yes (Rev. Rul. 2004-86) | Yes | Yes |
| Number of investors | Unlimited | 1 | Up to 35 |
| Management | Sponsor (passive) | Owner (active) | Shared / manager |
| Financing | Non-recourse, pre-arranged | Investor-arranged | Each co-owner signs |
| Typical minimum | $25K–$100K | Full asset price | Larger |
| Decision-making | None (by design) | Full | Unanimous on key items |
General comparison; specific offerings vary. Not tax or legal advice.
Where to go next
Live marketplace of DST and 1031 replacement properties.
Tracked sponsors with realized full-cycle track records.
Full-cycle returns and sector yield benchmarks.
Request a consultation — you'll reach the desk directly.
Frequently asked questions
What is a Delaware Statutory Trust (DST)?
Can I use a DST for a 1031 exchange?
What is the typical minimum investment in a DST?
How long is a DST held?
What happens when a DST sells?
Are DSTs risky?
Key DST terms
- Beneficial interest
- An investor's ownership share in a DST; treated by the IRS as a direct interest in real property for 1031 purposes.
- Rev. Rul. 2004-86
- The 2004 IRS ruling confirming that a properly structured DST interest qualifies as like-kind replacement property.
- Full cycle
- A DST program that has been acquired, held, and sold — so its realized investor return can be measured.
- Non-recourse debt
- Loan secured only by the property; the lender cannot pursue investors personally, satisfying the 1031 debt-replacement rule.
- Sponsor
- The firm that acquires the asset, structures the trust, and manages it on investors' behalf.
- Seven deadly sins
- IRS restrictions on a DST trustee (e.g., no new capital, no renegotiating leases) that preserve 1031 eligibility and make the investment passive.
Securities offered through Aurora Securities, Inc. (ASI) — CRD #46147, SEC #8-51322 — member FINRA/SIPC. Gerald F. 'Jerry' Baker, III is a registered representative of ASI (FINRA CRD #7537416). Baker 1031 Investments, LLC is independent of ASI and is not a registered broker-dealer or investment adviser. This page is informational only and is not an offer to sell or a solicitation of an offer to buy any security, or tax or legal advice; any offer is made solely through a sponsor's private placement memorandum following a suitability determination. DST and related securities are speculative and illiquid, for accredited investors only, and involve substantial risk including possible loss of principal.