How to Invest in a Delaware Statutory Trust: Step by Step

Key takeaways

• You invest in a DST by reading its private placement memorandum, signing a subscription agreement, and funding it. With a 1031 exchange, your qualified intermediary sends the money, and you never touch it.
• Most DSTs accept only accredited investors. Being eligible doesn't make an offering right for you. That is a separate suitability review.
• In my offering records as of October 2026, the median DST minimum investment is $100,000, and 21 of 76 offerings (28%) start at $25,000.
• The 1031 clocks drive everything. You must identify a DST in writing within 45 days of your sale and close within 180 days. DSTs fill up, so do your review early.
• Size your purchase for value, equity and debt, not just cash. An all-cash DST alone may leave you short of the debt you paid off.
• DSTs are illiquid, give you no control, and can lose money. Distributions are not guaranteed. This guide is education, not tax or legal advice.

What does it mean to invest in a DST?

A Delaware Statutory Trust is a trust formed under Delaware law that owns one or more income-producing properties. Many investors each own a slice of the trust. The trust holds the deed, and a sponsor runs the property.

The sponsor is the real estate company that found the property, arranged any loan, and wrote the offering documents. You don't manage anything. That is the main appeal, and also the main trade-off.

When you invest, you buy a "beneficial interest" in the trust. That is a legal term for an ownership share. For federal income tax purposes, a properly structured DST interest is treated like owning a piece of the real estate itself. For securities law, it is a security. Both are true at once.

I won't repeat how the structure works here. My complete guide to Delaware Statutory Trusts covers the trust rules, master leases, debt, fees, taxes and exits. This guide is about the practical steps of buying in.

There are two ways people invest in a DST:

1. With 1031 exchange money. You sell investment real estate, and a qualified intermediary holds your sale proceeds. You then use those proceeds to buy a DST interest as your replacement property. This is the most common way people invest in a DST.
2. With cash. You invest money that isn't from an exchange, such as savings or the proceeds of a taxable sale. No 1031 deadlines apply, and no tax is deferred on the way in.

The steps overlap a lot. The 1031 path just adds strict deadlines and a middleman. I'll cover the 1031 path first and then explain what changes with cash.

Why can a DST be 1031 replacement property?

A 1031 exchange is a tax rule. It lets you sell investment real estate and buy other investment real estate without paying capital gains tax right away. The tax is deferred, not erased. The rule comes from Section 1031 of the Internal Revenue Code, which covers real property "held for productive use" in a business or for investment.

In 2004, the IRS issued Revenue Ruling 2004-86. It looked at a DST that owned one rental property under tight limits on what the trustee could do. The IRS concluded that a taxpayer "may exchange real property for an interest in the Delaware statutory trust" without recognizing gain under Section 1031, if the other requirements of the section are met.

That's why a DST interest can qualify as replacement property. Note the word "can." The trust must be structured and run within those limits. Your own exchange must also follow every 1031 rule. If either fails, you could owe tax.

The IRS also explains that you must recognize gain on any money or other non-like-kind property you receive in the exchange. Its like-kind exchange tax tips page says so plainly. That cash or other property is often called "boot." Avoiding boot is a big part of sizing a DST purchase, which I cover below.

Who can invest in a DST?

Three things decide whether you can buy a given DST interest.

You usually need to be an accredited investor

Most DSTs are private offerings sold only to accredited investors. An accredited investor is a person or entity that meets SEC tests for income, net worth or certain licenses.

The SEC's investor bulletin on accredited investors gives the main tests for individuals:

• earned income above $200,000 in each of the past two years ($300,000 with a spouse or spousal equivalent), with a reasonable expectation of the same this year,
• net worth over $1 million, alone or with a spouse or spousal equivalent, not counting your home, or
• a Series 7, 65 or 82 license held in good standing.

Trusts, LLCs and other entities have their own tests. My guide on accredited investor requirements walks through every category, the questionnaire, and worked examples. If you're close to a line, read it before your sale closes.

The buyer must match the seller

In a 1031 exchange, the taxpayer who sells must generally be the taxpayer who buys. If your LLC sold the rental, your LLC buys the DST interest. If you and your spouse held title together, you both usually appear on the subscription.

This trips people up when an entity sold the property but the owners want to invest in their own names. Fixing that takes planning by your tax attorney, well before the sale. It can't be fixed on day 40.

The investment has to suit you

Accredited status makes you eligible. It doesn't make any one DST right for you. The broker-dealer that sells the offering has its own duty to review whether a recommendation fits your situation.

FINRA Regulatory Notice 23-08 says firms "must conduct a reasonable investigation of any security or investment strategy involving a security" they recommend. It also says that analysis "should not rely solely upon representations made by the issuer or its affiliates." That's why you'll be asked about your goals, time horizon, liquid assets and experience. My guide on who DSTs are for looks at common investor situations, and why the answer is always decided case by case.

What is the DST minimum investment?

Every DST sets a minimum. It's stated in the offering documents.

In my offering records as of October 2026, the median minimum is $100,000. Minimums range from $25,000 to $500,000. 21 of 76 offerings (28%) start at $25,000.

A few practical points matter more than the headline number.

The minimum is per offering

If you split your exchange across three DSTs, each one has its own minimum. Lower minimums make it easier to spread your money across several properties, sponsors and regions. Spreading money out doesn't protect against loss.

Above the minimum, amounts are flexible

Many offerings accept amounts above the minimum, sometimes only in set increments. The PPM's subscription terms say which. That flexibility is useful in a 1031. If the offering still has room, you can often size a DST to absorb the cash left after you buy another property.

Small leftovers can still be a problem

Say your exchange leaves $18,000 of cash that no property absorbs. That's below even a $25,000 minimum. You'd need to put it into another identified property, or accept that it may be taxable. My guide to partial 1031 exchanges and boot explains how leftover cash is taxed.

A minimum is not a recommendation

A $25,000 minimum doesn't mean $25,000 is a sensible amount for you. Fees, illiquidity and concentration all matter more than the entry ticket.

How does a 1031 exchange into a DST work?

Here is the whole path in one table. The steps after it fill in the details.

The deadlines come from the statute and the Treasury regulation at 26 CFR 1.1031(k)-1. The identification period "ends at midnight on the 45th day" after your sale. The exchange period ends at midnight on "the earlier of the 180th day thereafter or the due date (including extensions)" of your tax return for that year.

The IRS fact sheet on like-kind exchanges is blunt about this: "These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters."

How to invest in a Delaware Statutory Trust, step by step

These are the steps I walk clients through. The first three should happen before your sale closes.

Step 1: Start before you sell

A common problem is a late start. Someone closes a sale, then starts learning about DSTs on day 20. That leaves 25 days to review offerings, read documents and decide.

Start when you decide to sell, ideally before you list. That gives you time to learn, run numbers with your CPA, and look at offerings without a clock running.

Step 2: Line up a qualified intermediary

A qualified intermediary, or QI, is a company that holds your sale proceeds during the exchange. It signs an exchange agreement with you that limits your access to the money. Choose one carefully, and ask how it protects your funds.

The QI must be in place before your sale closes. The IRS fact sheet says, "You can not act as your own facilitator." Your recent agents, such as your real estate broker, accountant or attorney, generally can't serve as your QI either.

If the sale money reaches your own bank account, the exchange can fail. The regulation's safe harbor works only when the agreement "expressly limits" your rights to receive or borrow the funds. Let the QI hold it.

Step 3: Run your three targets with your CPA

To defer all of your gain, your replacement purchases generally need to meet three targets:

1. Value. Buy replacement property worth at least your net sale price. Net sale price is the sale price minus selling costs.
2. Equity. Reinvest all the cash your QI holds.
3. Debt. Replace any loan you paid off at the sale, with new debt or with extra cash of your own.

Miss one, and part of your gain may be taxable. Your CPA should confirm these numbers for your situation. If you want a rough sense of what's at stake, my 1031 tax deferral calculator gives a ballpark.

This step matters for DSTs because each DST has its own loan-to-value, or LTV. LTV is the loan divided by the property's value. When you buy into a leveraged DST, you're credited with your share of its debt. An all-cash DST gives you no debt credit at all.

Step 4: Confirm you're eligible

Check that you, or the entity that is selling, meet an accredited investor test. Gather what you'll need: recent account statements, entity documents if an LLC or trust is buying, and identification.

Decide who is actually buying. The name on the DST subscription should match the taxpayer on the sale. Your QI can confirm this.

Step 5: Have an introductory call

This is where my process starts. On the first call, we talk about your sale, your timeline, your goals and your other assets. I want to know how long you can leave the money alone, how much income you hope for, and how you feel about debt.

We also talk about whether a DST fits at all. Sometimes it doesn't. A direct purchase, a partial exchange, or paying the tax can make more sense. I'd rather say that on the first call than on day 40.

Step 6: Review opportunities together

Next, we review offerings. I explain why I'm considering each one, what I like about it, and where I have reservations. You'll get each offering's private placement memorandum, or PPM. A PPM is the legal document that describes the property, the loan, the fees, the conflicts of interest and the risks.

Read it, and read the risk factors twice. My guide on how to read a DST offering shows where the important details hide. My guide to DST fees and returns explains the costs in the "estimated use of proceeds" table.

At this stage, compare offerings on a few things side by side:

• property type, location and tenant strength,
• loan amount, interest rate and loan maturity,
• up-front load and ongoing fees,
• projected hold period and exit terms, including any 721 exit into a REIT,
• reserves compared with the building's age and condition, and
• the sponsor's track record and finances.

Step 7: Check that the offering is still open

DSTs sell out. An offering that's open on day 10 might be fully subscribed by day 35. Before you identify a DST, ask whether it is open, how much room is left, and whether the sponsor can hold an allocation for you.

A reservation isn't a commitment by either side, and it isn't always available. But asking early avoids a nasty surprise.

Step 8: Identify in writing by day 45

You send a signed, written identification to your QI by midnight on day 45. The regulation lets you name up to three properties of any value, or more under the 200% rule. If you exceed both limits, the 95% rule applies, and you must acquire at least 95% of what you identified.

For a DST, name the trust's full legal name as it appears in the offering documents, not a marketing nickname. My guide to 1031 exchange identification rules covers the three rules, how to count leveraged DSTs under the 200% rule, and how to revoke and replace a list before day 45.

Many people identify more than one DST, or a DST plus a direct property. That gives you a backup if one offering fills up or a direct deal falls through.

Step 9: Complete the subscription documents

Once you choose, you complete the subscription package. I describe each document in the next section. My team coordinates the paperwork with the sponsor and your QI.

Take your time with the signatures, but don't sit on the package. Missing pages and mismatched names are common causes of delay.

Step 10: Your QI funds, and the sponsor closes

Your QI wires your exchange funds directly to the sponsor or its escrow agent. The sponsor accepts your subscription, and you receive confirmation of your beneficial interest.

Because the trust already owns the property, there's no inspection period, appraisal contingency or loan for you to qualify for. Closing can often take two to three business days once paperwork, funding and approvals are complete. That's typical, not certain.

Step 11: Report the exchange and keep records

You report the exchange on IRS Form 8824, which the IRS says is used to "report each exchange of business or investment property for property of a like kind." It's filed with your tax return for the year of the sale.

After that, the sponsor sends an annual statement showing your share of the trust's income, expenses and depreciation. Keep your closing documents, your identification letter, your QI statements and your old depreciation records together. Your CPA will need all of them, possibly decades from now.

What paperwork do you sign to invest in a DST?

The package varies by sponsor and broker-dealer. Here is what you'll usually see.

Two of these deserve extra care.

The investor questionnaire

Answer it accurately. The questions about liquid assets, time horizon and what share of your net worth you're investing feed the suitability review. If your answers suggest the investment doesn't fit, a careful broker-dealer will say so. That's a useful conversation, not an obstacle.

The trust agreement

The trust agreement is the DST's governing document. It explains how interests can be transferred, what happens at a sale, and when the trust can convert to an LLC. That conversion is often called a "springing LLC." My DST guide explains why it can affect your future 1031 exchanges. Read those sections before you sign.

How long does it take to close on a DST?

Once you've chosen an offering, the closing itself is usually quick. In my practice, closing can often take two to three business days with complete paperwork, funding and approvals.

Compare that with buying a building. A direct purchase often takes 30 to 60 days or more, because of inspections, appraisals, loan approval and title work.

What makes a DST closing fast

• The trust already owns the property, and any loan is already in place.
• You don't qualify for a loan or sign one.
• There's no inspection, appraisal or seller negotiation.
• The sponsor has done the title and legal work once, for all investors.

What slows a DST closing down

• A name mismatch between the 1031 seller and the subscriber.
• Missing entity documents, such as trustee certification pages.
• A QI that needs extra time or signatures to release funds.
• An offering that is nearly full and must confirm your allocation.
• Questions from the broker-dealer's compliance review.
• Wire cut-off times, weekends and holidays.

Two to three business days assumes everything is ready. Build in a cushion. I'd rather close on day 120 with time to spare than on day 179 with no margin for a missed wire.

A worked example: from sale to DST closing

This is a hypothetical example with round numbers. It doesn't represent any offering or any client. It ignores offering costs and loads, which change how much property value each dollar of equity buys. It isn't tax advice, and your CPA should run your real figures.

The sale

Say you sell a rental duplex for $1,500,000. Your selling costs are $90,000, and you pay off a $500,000 loan at closing. The sale closes on March 2.

• Net sale price: $1,500,000 − $90,000 = $1,410,000. This is your value target.
• Cash held by your QI: $1,410,000 − $500,000 = $910,000. This is your equity target.
• Debt paid off: $500,000. This is your debt target.

The calendar

• Day 0: March 2. Sale closes, and your QI receives $910,000.
• Day 45: April 16. Your signed identification must reach your QI by midnight.
• Day 180: August 29. Your purchases must close by midnight.

My 1031 exchange deadline calculator works out these dates from any sale date.

The purchase plan

You decide to split the money between two DSTs. One uses a 50% LTV loan, and one uses no debt.

Check the three targets:

• Value: $1,410,000 meets the $1,410,000 target.
• Equity: all $910,000 is reinvested.
• Debt: $500,000 of debt credit meets the $500,000 paid off.

On paper, every target is met. In real life, I'd want a cushion above each target. Small changes in closing costs or the final loan payoff can push you short.

The identification

On March 25, you identify three properties under the three-property rule: DST A, DST B, and DST C as a backup. DST C is another leveraged DST with a similar structure. You send the signed list to your QI the same day.

What goes wrong, and how the backup helps

On April 2, the sponsor of DST A says the offering is fully subscribed. Because DST C is already on your list, you can still buy it. You put $500,000 into DST C instead. Say DST C has a 45% LTV rather than 50%.

• Your share of value: $500,000 ÷ 0.55 = about $909,091
• Your share of debt: $909,091 × 0.45 = about $409,091

Now your totals are about $1,319,091 of value and $409,091 of debt. You're about $90,909 short on both value and debt. Some of your gain could be taxable.

You have choices. You could add about $90,909 of your own cash to an identified property, such as DST B if it still has room, before day 180. Cash you add offsets debt you didn't replace, and it also brings your value back to $1,410,000, because value is your equity plus your share of debt. You could accept some taxable gain. Your CPA should tell you which is cheaper.

The lesson is simple. A backup should be sized and checked before day 45, not after. Different LTVs change the math.

The closing

You sign the subscription documents for DST B and DST C on April 20. Your QI wires the funds. Both closings finish within a few business days, well before day 180. In the following spring, your CPA reports the exchange on Form 8824.

Buying a DST interest vs. buying a rental property directly

Here is how the buying process compares. These are general features. Every deal is different.

The table shows why many people use DSTs as backups or as "plugs" for leftover cash. It also shows what you give up. Once you close, you have no say in running the property, and you can't easily sell.

Can you use a DST for only part of your exchange?

Yes. Many investors buy a direct property and put the rest into a DST.

Say you find a fourplex that absorbs most of your exchange, but $260,000 of cash is left over. A DST sized to $260,000 can keep that leftover cash in the exchange. Without it, that $260,000 could be taxable boot.

You still have to identify both properties within 45 days. The DST also has to meet its own minimum, and the combination has to hit your value and debt targets.

Can you invest in a DST with cash instead of a 1031?

Yes, if you meet the offering's investor requirements and the offering accepts cash investors. Some people invest cash from savings, a taxable sale, or a trust. Here is how that path differs.

With cash, the steps are simpler. You still read the PPM, complete the questionnaire and subscription agreement, and wire funds. There is no identification letter.

Some investors ask whether a cash investment can later be exchanged. When a DST sells, investors are generally treated as selling their share of the real estate. That may let a cash investor do a 1031 exchange at the sale, if the rules are met. That generally doesn't apply if the trust has converted to a springing LLC or you've taken a 721 exit, and it requires a qualified intermediary in place before the DST's sale closes. Confirm that with your CPA before you count on it.

How do you identify a DST within the 45-day window?

The 45-day window is where most DST purchases are won or lost. My identification rules guide covers the law in detail. Here are the DST-specific points I'd add.

Review before you identify

You can only buy what you identify. So the review of the offering, the sponsor, the property and the debt has to happen inside those 45 days. That's why I like to start before the sale closes.

Identify real alternatives

A backup should be something you'd actually want. Don't add a DST you haven't read just to fill a slot. If you end up buying it, you'll own it for years.

Mix structures with care

If your main plan depends on a leveraged DST, a backup with a different LTV changes your debt math. The worked example above shows how much.

Watch the 200% rule with leveraged DSTs

When you invest $500,000 in a DST with a 50% LTV, is that a $500,000 property or a $1,000,000 property for the 200% rule? Ask your QI and CPA before you send your list. If you use the three-property rule, the question doesn't come up.

Keep a copy of what you sent

Keep the signed list and proof that your QI received it. It belongs with your tax records.

How I work with investors

My background is in real estate acquisitions, management and development. I grew up in Birmingham, Michigan, and studied applied mathematics and applied statistics at Babson College. I worked in acquisitions, management and development at ValueRock Realty Partners, Faris Lee Investments, Westport Capital Partners and Arbor Bay Capital Partners. I've been involved in more than $10 billion of real estate investment activity.

My process has three parts.

1. Introductory call. We talk about your sale, your goals, your timeline and whether a DST makes sense at all.
2. Review opportunities together. I walk you through the offerings I currently have available. For each one, I tell you why I'm considering it, what I like, and where I have reservations.
3. Close. My team coordinates the paperwork with the sponsor and your qualified intermediary. Because the properties are already acquired, closing can often take two to three business days with complete paperwork, funding and approvals.

Before an offering reaches you, my team and I review it across five areas, and we partner with outside auditors in each one:

1. Broker-dealer review
2. Investment manager audit
3. Investment offering review
4. Real estate assessment
5. Institutional underwriting

That review is continuous, not a one-time check. I offer DSTs from more than 20 institutional sponsors. I also track more than 1,100 full-cycle 1031 DST investments for performance. Full-cycle means the property was bought, held and sold, so we can see what actually happened.

Securities are offered through Aurora Securities, Inc., member FINRA/SIPC. Baker 1031 Investments is independent of Aurora. Before you work with anyone selling securities, you can look up the representative and the firm on FINRA BrokerCheck, which shows employment history, licenses and any disciplinary events.

Mistakes to avoid when investing in a DST

These are common mistakes, roughly in order of how much they can cost.

1. Starting after the sale closes. You lose weeks of the 45-day window to learning. Start when you decide to sell.
2. Letting the cash touch your account. If sale proceeds reach you, the exchange can fail. Set up the QI before closing.
3. Sizing by cash alone. Reinvesting all your cash isn't enough if you paid off a loan. Check value and debt too.
4. Identifying only one DST. Offerings fill up. A real backup protects the exchange.
5. Naming a backup you haven't reviewed. You might end up owning it for ten years. Read it before you list it.
6. Ignoring the LTV of each option. Swapping a 50% LTV DST for an all-cash one can leave you short on debt.
7. Mismatched buyer and seller. If your LLC sold, your LLC usually buys. Sort this out before the sale.
8. Treating the minimum as a target. A $25,000 minimum says nothing about the right amount for you.
9. Skimming the PPM. Fees, conflicts, loan terms and exit terms all live there. So do the risks.
10. Waiting until day 175 to subscribe. Paperwork problems, wire cut-offs and holidays eat time. Leave a cushion.
11. Chasing the highest projected distribution. A high projection can reflect more debt, a weaker tenant or thinner reserves. Ask why it's high.
12. Forgetting state rules. Some states, including California, track deferred gain when you exchange into property in another state. Ask your CPA.
13. Skipping your advisors. A DST purchase is a tax and legal decision as much as an investment one. Bring in your CPA, attorney and QI early.

Risks to weigh before you invest

DST interests are speculative, illiquid securities. Read the full PPM, including its risk factors, before you invest. Here are the main risks.

• Loss of principal. Property values can fall. You can lose some or all of your investment.
• Distributions are not guaranteed. They depend on the property's income. They can be reduced or stopped.
• Illiquidity. There's no public market and usually no redemption feature. The SEC's bulletin on private placements says investors "should be prepared to hold the securities indefinitely."
• Limited control. You have no say in leasing, financing, management or sale timing.
• Reliance on the sponsor. The sponsor's judgment, finances and conflicts of interest affect your investment directly.
• Fees. Up-front and ongoing fees reduce the money invested in real estate and your returns.
• Leverage. Debt magnifies losses as well as gains, and a loan maturity can force a sale at a bad time.
• Exchange risk. Missed deadlines, a failed identification or cash in your hands can make some or all of your gain taxable.
• Tax risk. If the trust doesn't follow the limits in Rev. Rul. 2004-86, the tax treatment could fail. Tax law can also change.
• Offering risk. An offering can fill or close before you subscribe.

The same SEC bulletin notes that a Form D filing "does not represent SEC approval or registration." No regulator approves a DST as a good investment.

FINRA's predecessor raised many of these issues in Notice to Members 05-18, written about fractional real estate sold for 1031 exchanges. It told firms to weigh "whether the fees and expenses associated with TIC transactions outweigh the potential tax benefits to the customer." The same question applies to DSTs, and I ask it with every client.

What my data shows

Here is what my offering records as of October 2026 show, across 76 DST offerings from 38 sponsors. These figures describe the offerings I track. They aren't a forecast or a promise about any future offering.

The median DST minimum investment is $100,000

This is often the first number people want when they're figuring out how to invest in a DST.

Lower minimums make it easier to split an exchange across several DSTs, or to place a leftover amount after a direct purchase. A higher minimum can rule out an offering for a smaller exchange.

Many offerings aren't open when you need them

Of the 76 offerings, 16 are open, 6 have limited availability, 24 are under review, 25 are closed, and 5 are ones I reviewed and passed on.

This is why I encourage identifying real backups. At any moment, many of the offerings in my records are closed or not yet open. An offering you like on day 5 may be full by day 40.

Debt varies widely

36 of 76 offerings (47%) are all-cash, with no debt. 16 offerings (21%) have loan-to-value above 50%. Among leveraged offerings, the median LTV is about 49%.

If you paid off a loan when you sold, the leveraged offerings are where you can replace debt. If you want to avoid loan risk, all-cash offerings are common, but you may need to add cash or mix in a leveraged option.

Holds are long

A projected 10-year hold is the most common, at 31 offerings. Others project 5 to 10 years or 7 years, and a few are 2-year programs. Plan to leave the money in place for the full hold, and assume it could run longer.

Distributions are projections

Among the 71 offerings that published a projected year-one distribution rate, the median was 4.7%, with a range of 4.0% to 9.0%. These are projections, not promises. Distributions are not guaranteed, and actual results can differ a lot.

Frequently asked questions

How do I invest in a DST with my 1031 exchange money?

Set up a qualified intermediary before your sale closes, identify the DST in writing within 45 days, and close within 180 days. You sign the subscription documents, and your QI wires the exchange funds directly to the sponsor. You never take the money yourself.

What is the minimum investment for a DST?

It depends on the offering. In my offering records as of October 2026, the median minimum is $100,000, with a range of $25,000 to $500,000. About 28% of offerings start at $25,000.

Do I have to be an accredited investor to buy a DST?

Usually, yes. Most DSTs are private offerings sold only to accredited investors. For individuals, that generally means income above $200,000 ($300,000 jointly) in each of the past two years, net worth over $1 million excluding your home, or certain securities licenses.

How long does it take to close on a DST?

Once you've chosen an offering, closing can often take two to three business days with complete paperwork, funding and approvals. That's because the trust already owns the property and any loan is in place. Delays usually come from missing documents or an offering that's nearly full.

Can I identify more than one DST in my 1031 exchange?

Yes. Under the three-property rule, you can name up to three properties of any value, and each DST counts as one. You can name more under the 200% rule, but the value math with leveraged DSTs needs care, so check with your QI and CPA.

What happens if the DST I identified fills up?

You can't buy it, and you can only buy property you identified by day 45. That's why I recommend identifying at least one real backup. If none of your identified properties can be bought, part or all of your gain may be taxable.

Can I invest in a DST with cash instead of a 1031 exchange?

Often, yes, if you meet the investor requirements and the offering accepts cash. There are no 1031 deadlines and no QI. No tax is deferred on the way in, since you're investing money that has already been taxed.

Can I put part of my exchange in a DST and buy a property with the rest?

Yes. Many investors buy a direct property and use a DST to absorb leftover cash that might otherwise be taxable. Both must be identified within 45 days, and the combination needs to meet your value and debt targets.

Who sends the money to the DST sponsor?

In a 1031 exchange, your qualified intermediary wires the funds directly to the sponsor or its escrow agent. In a cash investment, you wire the money yourself. Either way, double-check wire instructions by phone with a known contact before any money moves.

Can I sell my DST interest if I need the money?

Usually not easily. There's no public market, and transfers generally need sponsor consent. Plan to hold for the full projected hold, which is often 10 years, and possibly longer.

What tax forms do I file after investing in a DST?

You report the exchange on IRS Form 8824 with your return for the year of the sale. After that, the sponsor sends an annual statement of your share of income, expenses and depreciation. Your CPA uses it to prepare your return.

Before you act

This guide is for education only. It isn't tax, legal or investment advice. Please confirm every decision with your CPA, attorney and qualified intermediary. DST interests are offered only by private placement memorandum to qualified investors, and you can lose your entire investment.

Sources

• 26 U.S.C. § 1031, Exchange of real property held for productive use or investment (Cornell LII)
• 26 CFR § 1.1031(k)-1, Treatment of deferred exchanges (Cornell LII)
• IRS Revenue Ruling 2004-86
• IRS, Like-Kind Exchanges: Real Estate Tax Tips
• IRS Fact Sheet FS-2008-18, Like-Kind Exchanges Under IRC Code Section 1031
• IRS, About Form 8824, Like-Kind Exchanges
• Investor.gov, Updated Investor Bulletin: Accredited Investors
• Investor.gov, Private Placements under Regulation D, Investor Bulletin
• FINRA Regulatory Notice 23-08
• FINRA (NASD) Notice to Members 05-18
• FINRA BrokerCheck