Who Should Invest in a DST? Tired Landlords, Retirees and More

Key takeaways

• DSTs usually come up for people selling investment real estate with a large gain who want to stop managing property but keep deferring tax through a 1031 exchange.
• Common situations include tired landlords, accidental landlords, retirees, out-of-state owners, very small and very large exchanges, cash investors and IRA money. Each one has its own trade-offs.
• DSTs aren't right for everyone. Suitability is decided case by case, based on your goals, time horizon, liquid assets, experience and tax picture.
• A DST is a poor fit if you may need the money within several years, want control, or have a small gain. Most DSTs are also limited to accredited investors.
• In my offering records as of October 2026, 21 of 76 offerings (28%) start at $25,000, and 36 of 76 (47%) use no debt. Both numbers matter for smaller exchanges and IRA money.
• DSTs are illiquid, can lose money, and distributions are not guaranteed. This guide is education, not tax, legal or investment advice.

Who should invest in a DST?

I want to be careful with this question. There is no type of person who "should" own a DST. There are situations where a DST is worth a serious look, and situations where it usually isn't.

A Delaware Statutory Trust is a trust that owns one or more income-producing properties. Many investors each own a fractional share, called a beneficial interest. A sponsor, which is the real estate company behind the offering, runs the property. My complete guide to Delaware Statutory Trusts explains how the structure works. I won't repeat it here.

This guide is about people. It walks through common situations where DSTs come up. For each one, I explain why a DST comes up, what to weigh, and when it may not fit.

One rule runs through every section. DSTs aren't right for everyone. Whether one suits you is decided case by case. That decision weighs your goals, your time horizon, your liquid assets, your experience and your tax picture. The broker-dealer that sells the offering also has its own duty to review whether a recommendation fits you.

FINRA Regulatory Notice 23-08 says firms "must conduct a reasonable investigation of any security or investment strategy involving a security" they recommend. An older notice on fractional real estate for 1031 exchanges, NASD Notice to Members 05-18, says firms must "have a clear understanding of the investment goals and current financial status of the investor." Nothing in this guide replaces that review.

What do people who consider DSTs usually have in common?

Across the situations below, a few traits come up again and again. None of them makes a DST right for you on its own. But if most of them don't describe you, a DST probably isn't the tool.

They're selling investment real estate with a gain

Most DST investors arrive through a 1031 exchange. A 1031 exchange is a tax rule that 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. It comes from Section 1031 of the Internal Revenue Code.

A DST interest can qualify as 1031 replacement property. That's because of IRS Revenue Ruling 2004-86, which says a taxpayer "may exchange real property for an interest in the Delaware statutory trust" without recognizing gain, if the other requirements of Section 1031 are met.

They want to stop managing property

A DST gives you no management work and no control. For some people, that's the whole point. For others, it's a deal-breaker.

They meet the investor requirements

Most DSTs are sold only to accredited investors. The SEC's investor bulletin explains the main tests for individuals: income above $200,000 in each of the past two years ($300,000 with a spouse or spousal equivalent), net worth over $1 million excluding your home, or a Series 7, 65 or 82 license in good standing. My guide on accredited investor requirements covers every category in detail.

They can leave the money alone for a long time

DST interests are illiquid. The SEC's bulletin on private placements says investors "should be prepared to hold the securities indefinitely." I tell people to invest only money they could leave in place for ten years or more without strain.

They have other money to live on

People who do well with illiquid investments usually have savings, retirement accounts or income that cover their needs. The DST money isn't the money they'll need next year.

Tired of being a landlord? How tired landlords weigh a DST

This is one of the most common situations. You've owned rentals for 15 or 25 years. The building has done well. But you're tired of tenant calls, repairs, turnover, rising insurance and property tax bills.

You want out of the work. You don't want a large tax bill. A DST is one way to do both, but it isn't the only way.

Your options, side by side

Here is how the common ways to stop being a landlord compare. These are general features. Your numbers will decide which one makes sense.

An installment sale is a sale where at least one payment comes after the year of the sale. Under 26 U.S.C. § 453, the gain is generally reported "under the installment method," which spreads it across the years you're paid. Your CPA can tell you whether it fits your situation.

Why tired landlords look at DSTs

A DST can let you keep your gain deferred and hand off every management job at once. You also trade one building for a share of larger, professionally managed property. Some people spread their money across several DSTs, property types and states. Spreading money out doesn't protect against loss.

What tired landlords should weigh

• You give up all control. You can't decide when to sell, who to lease to, or how much to spend on repairs.
• The fees are real. DSTs carry up-front costs and ongoing fees that a building you own outright doesn't.
• You can't easily get out. If you change your mind in year three, there's usually no way to sell.
• Distributions are not guaranteed. Rental income from a DST can drop or stop, just like rent from your own building.

Is a DST a fit for a tired landlord?

Sometimes. DSTs aren't right for everyone, and suitability is decided case by case. If you enjoy the work and just need a break, a good property manager may be enough. If you're truly done, and the money can stay put for a decade, a DST is worth comparing with the other options above.

Accidental landlords: does a DST make sense?

An accidental landlord didn't plan to own a rental. You moved for a job and rented out your old house. Or you married and kept your home. Or you inherited a property from a parent.

Accidental landlords often come to DSTs later, when they're ready to sell. But their tax picture can differ a lot from a long-time investor's. That changes whether a DST makes sense.

If it used to be your home

A home you lived in may qualify for the home sale exclusion if you sell within certain time limits. A former home turned rental may also qualify for a 1031 exchange, if it's now held for investment. Sometimes both rules can apply to the same sale. My guide to 1031 exchanges and your primary residence explains how they interact.

The point is that your taxable gain may be smaller than you think. If so, a DST's fees and illiquidity may cost more than the tax you'd defer.

If you inherited it

Inherited property usually gets a new tax basis at the owner's death. Under 26 U.S.C. § 1014, the basis is generally "the fair market value of the property at the date of the decedent's death." So if you sell soon after inheriting, your gain may be small.

A small gain is a weak reason to buy a DST. If you hold the inherited home for years and it rises in value, the picture can change. Run the numbers with your CPA before deciding.

Is a DST a fit for an accidental landlord?

It depends almost entirely on the size of the gain and how long you can hold. DSTs aren't right for everyone, and suitability is decided case by case. If your gain is modest, paying the tax and keeping your money liquid may be the simpler choice.

Retirees: how a 1031 exchange for retirees can work

Many people who consider DSTs are retired or close to retirement. The questions change at this stage. It's less about growth and more about simplicity, steady cash flow, and what you leave behind.

Why retirees look at DSTs

• No more management. A DST removes the work of running a rental.
• Deferral continues. A 1031 exchange into a DST can keep a large gain deferred.
• Estate planning. Under current law, heirs generally receive a stepped-up basis at death. My step-up in basis guide explains how that can affect deferred gain.
• Splitting a large property. One building is hard to divide among several heirs. Several smaller DST interests can be easier to leave to different people, though each interest is still illiquid.

Can a DST provide retirement income?

Many DSTs pay regular distributions from rental income. But I want to be precise here. Distributions are not guaranteed. They can be reduced or stopped if the property's income falls, expenses rise, or a lender holds back cash.

A DST should never be the only source you count on for living expenses. Think of distributions as possible income, not promised income. Plan your budget so you'd be fine if they dropped for a while.

What retirees should weigh most

• Liquidity. Money in a DST is usually locked up for the full hold, often 10 years. Keep enough in savings and accessible accounts for health costs, home repairs and surprises.
• Concentration. Putting nearly all your net worth in illiquid real estate is risky at any age. It's riskier when you're drawing on your savings.
• Your heirs. If your children will inherit DST interests, they'll inherit the illiquidity too. Talk to them, and to your estate attorney.
• Partial exchanges. You don't have to exchange everything. You can take some cash, pay tax on that part, and exchange the rest.

A worked example: a retired couple

This is a hypothetical example with round numbers. It doesn't represent any client or offering. It isn't tax advice.

Say a retired couple, ages 70 and 68, sell a rental house for $1,200,000. They have no loan on it. Selling costs are $70,000. Their tax basis is $300,000 after years of depreciation. Their gain is $1,200,000 − $70,000 − $300,000 = $830,000.

Outside the rental, they have $300,000 in savings and their retirement accounts. Assume the combined federal and state tax on a fully taxable sale would be about $250,000. That's a round number for illustration. The real figure depends on depreciation recapture, federal and state rates and the couple's other income.

The full exchange defers the most tax. But it leaves the couple with $300,000 of accessible money and over $1.1 million in illiquid investments for a decade or more.

The partial exchange costs some tax now. In return, it raises their accessible money to about $500,000, before the tax on the cash they kept. For many couples in their 70s, that trade is worth weighing. The right mix depends on their health, spending, other income and plans for heirs.

Is a DST a fit for a retiree?

For some retirees, yes. For others, no. DSTs aren't right for everyone, and suitability is decided case by case. Age alone doesn't decide it. What matters is whether you can afford to have this money locked up, and whether you'd be fine if distributions dropped.

Out-of-state landlords

Many people own a rental in a state where they no longer live. Maybe you moved from California to Nevada and kept your old condo. Maybe you bought in Texas from New York because prices were lower.

Managing from far away is hard. You depend on local managers, you can't see the property often, and small problems grow before you hear about them.

Why out-of-state owners look at DSTs

A DST removes the long-distance management. It also lets you choose where your money is invested without moving there. DSTs own property across many states.

What out-of-state owners should weigh

• State tax filings. You may need to file a nonresident return in each state where a DST owns property, depending on that state's rules.
• Your old state may keep tracking your gain. California is the clearest example. When you exchange California property for property in another state, the Franchise Tax Board says Form FTB 3840 "must be filed for the taxable year of the exchange and for each subsequent taxable year" until the deferred California gain is recognized.
• Your new state matters too. Moving to a state with no income tax doesn't erase another state's claim on gain earned there. Ask your CPA how both states treat you.

Is a DST a fit for an out-of-state owner?

It can be, especially when distance is the main headache. DSTs aren't right for everyone, and suitability is decided case by case. If you'd rather keep owning directly, a strong local property manager may solve the problem for less.

Exchanges under $500,000

People sometimes assume DSTs are only for very large exchanges. They aren't. Minimums vary by offering, and many are well under $100,000.

Why smaller exchanges look at DSTs

• Lower minimums. In my offering records as of October 2026, 21 of 76 offerings (28%) start at $25,000.
• Spreading a small amount. With lower minimums, even a $300,000 exchange can be split across two or three DSTs.
• Absorbing leftover cash. If you buy a direct property that doesn't use all your exchange money, a DST can take the rest. Otherwise that leftover cash could be taxable.

What smaller exchanges should weigh

• Fees take the same share. A DST's up-front load is a percentage of what you invest. On a $200,000 investment, the dollar amount is smaller, but the drag on your return is the same.
• Is the gain worth deferring? If your gain is $80,000, the tax may be modest. Paying it and keeping your money liquid could be simpler.
• Splitting too thin. Ten $25,000 pieces aren't automatically better than two $125,000 pieces. My guide on how many DSTs you should own works through that question.

A worked example: a $400,000 exchange

This is a hypothetical example. It doesn't represent any offering.

Say you sell a condo with no loan and have $400,000 of exchange cash. You want to spread it out. You might put $200,000 into a multifamily DST, $100,000 into an industrial DST, and $100,000 into a net lease DST. Each meets its offering's minimum.

You'd identify all three under the three-property rule. If one fills up before you subscribe, though, you'd have no backup on the list. You'd need to place that money in the other two, if they accept more, or accept some taxable boot. My guide to 1031 exchange identification rules explains how to build a list with real backups.

Is a DST a fit for a smaller exchange?

Sometimes. DSTs aren't right for everyone, and suitability is decided case by case. The size of your gain and your need for liquidity matter more than the size of your exchange.

Exchanges over $5 million

Large exchanges come with their own questions. The amounts are big enough to spread across many properties. They're also big enough that one mistake is expensive.

Why large exchanges look at DSTs

• Spreading risk. A $6 million exchange can be split across several DSTs with different sponsors, property types and states. Spreading money out doesn't protect against loss.
• Replacing a large mortgage. Leveraged DSTs credit you with a share of their debt, which can help replace a loan you paid off.
• A backup for direct deals. Many large exchanges buy one or two buildings directly and use DSTs as backups or to absorb the remainder.

What large exchanges should weigh

• The identification rules get tighter. The three-property rule caps you at three properties. To name more, you need the 200% rule, which limits the total value you identify. Go over both limits and the 95% rule applies, which requires you to buy almost everything you named.
• Valuing leveraged DSTs. Under the 200% rule, it matters whether a leveraged DST counts at your equity or at your share of the property's value. Ask your QI and CPA before you send your list.
• Concentration still matters. NASD Notice 05-18 warns that "concentration of an investor's assets in a single asset class, however, is not suitable for many investors." Ten DSTs are still all real estate.
• Sponsor concentration. Spreading across properties from one sponsor still ties your outcome to one company.
• Direct ownership may fit better. At this size, you can often buy institutional-quality property directly, with control. If you want control, that may be the stronger option.

A worked example: an $8 million exchange

This is a hypothetical example. It doesn't represent any client or offering.

Say you sell an apartment building and have $8 million of exchange equity and a $4 million loan to replace. You decide to buy one direct net lease building and put the rest in DSTs.

You identify five properties under the 200% rule: the direct building and four DSTs from three sponsors. Your QI and CPA confirm how to value each leveraged DST for the 200% test. You leave room under the limit in case a valuation shifts.

The direct building closes on day 95. You then buy three of the four DSTs, choosing leveraged ones to cover the remaining debt target. The fourth, a backup, isn't needed.

Is a DST a fit for a large exchange?

It can be one part of the plan. DSTs aren't right for everyone, and suitability is decided case by case. At this size, I'd expect your CPA, attorney and QI to be involved from the start.

Cash investors who aren't doing a 1031

Some people want to invest in a DST with money that isn't from an exchange. It might be savings, the proceeds of a taxable sale, or an inheritance.

Why cash investors look at DSTs

• Passive real estate. You get a share of professionally managed property without buying a building.
• Depreciation. As a DST owner, you're generally treated as owning your share of the real estate. Your share of depreciation can offset some of the taxable income from distributions.
• A possible future exchange. When a DST sells, investors are generally treated as selling their share of the property. That may allow a 1031 exchange at that point, 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 sale closes. Confirm with your CPA.

What cash investors should weigh

• No tax deferred on the way in. You're investing money that has already been taxed. The main reason most people buy DSTs doesn't apply.
• Compare with other options. Publicly traded real estate funds offer real estate exposure with daily liquidity, though with different risks and no 1031 path. Weigh what the DST's illiquidity buys you.
• Same eligibility rules. Most DSTs still require accredited status, whether or not you're doing an exchange.

Is a DST a fit for a cash investor?

Less often than for exchange investors. DSTs aren't right for everyone, and suitability is decided case by case. Without the tax-deferral benefit, the fees and illiquidity weigh more heavily.

Retirement and IRA money

Some people ask whether they can buy a DST inside an IRA. An IRA, or individual retirement arrangement, is a tax-advantaged retirement account. The answer is sometimes yes, but it's more complicated than people expect.

How IRA money reaches a DST

Most IRA custodians don't allow private placements. A self-directed IRA is an IRA whose custodian permits alternative assets. FINRA's investor alert on self-directed IRAs says these custodians may allow "alternative assets" such as real estate and private placement securities.

The same alert warns that custodians "DO NOT evaluate the quality or legitimacy of any investment in the self-directed IRA or its promoters." Your custodian holds the asset. It doesn't vet it.

Not every DST accepts IRA money. The offering documents say whether it does and how.

An IRA doesn't need a 1031 exchange

An IRA's investment gains generally aren't taxed year to year. So an IRA has no need for a 1031 exchange. The main reason most people buy DSTs, deferring a large gain, doesn't apply.

You also can't move a rental you own personally into your IRA, or sell it to your IRA. The IRS's retirement plan investments FAQs say prohibited-transaction rules apply "to transactions between an IRA and its owner or beneficiary." 26 U.S.C. § 4975 lists the "sale or exchange, or leasing, of any property between a plan and a disqualified person" as a prohibited transaction.

Debt inside a DST can create tax for an IRA

This is the issue most people miss. IRAs can owe tax on certain business income. IRS Publication 598 lists IRAs, "including traditional IRAs, Roth IRAs," among the accounts subject to the tax on unrelated business income.

Rent from real property is generally excluded from that tax under 26 U.S.C. § 512. But the exclusion is overridden for "debt-financed property." Under 26 U.S.C. § 514, part of the income from debt-financed property is taxable. The share is based on average debt divided by average adjusted basis.

So a leveraged DST inside an IRA can create taxable income for the IRA, even though the IRA itself is tax-advantaged. Publication 598 says Form 990-T "is required if the sum of the organization's gross income from all unrelated businesses is $1,000 or more."

A worked example: IRA money in a leveraged DST

This is a hypothetical, simplified example. It isn't tax advice.

Say your self-directed IRA invests in a DST with a 50% loan-to-value. Loan-to-value, or LTV, is the loan divided by the property's value. Roughly speaking, about half of the IRA's share of that DST's income could be treated as debt-financed income. The exact share depends on the average debt and basis for the year. That share usually rises over the hold, because depreciation lowers the basis each year while the loan often stays the same. Part of the IRA's gain when the property sells can also be debt-financed income.

If the IRA's gross unrelated business income, meaning the debt-financed portion, reaches $1,000, the IRA may need to file Form 990-T. Any tax would be paid from the IRA. Your CPA and your custodian should work this out before you invest.

An all-cash DST generally avoids the debt-financed income issue, because it has no acquisition debt. In my offering records as of October 2026, 36 of 76 offerings (47%) are all-cash.

Other IRA issues

• Required distributions. If your IRA must make required minimum distributions, an illiquid holding can make them harder to fund. Ask your custodian how it handles that.
• Valuation. Your custodian needs a yearly value for the DST interest. Ask the sponsor how it provides one.
• Eligibility. The offering's subscription documents explain how an IRA qualifies as an investor.

Is a DST a fit for IRA money?

Rarely as a first choice. DSTs aren't right for everyone, and suitability is decided case by case. The tax-deferral benefit doesn't apply, and debt can add a tax filing. Talk with your CPA and custodian before you consider it.

Business owners selling business real estate

Some business owners own the building their company uses. When they sell the business or retire, they often sell the building too.

Real estate used in a business can qualify for a 1031 exchange. Section 1031 covers real property held "for productive use in a trade or business or for investment." The business itself doesn't qualify. Its equipment, goodwill and inventory are not real property, so they can't be part of the exchange.

Why business owners look at DSTs

After decades of running a company, many owners don't want to run a building too. A DST can let the real estate part of the sale stay tax-deferred, without adding a new job.

What business owners should weigh

• Split the sale carefully. The price has to be divided between the real estate and everything else. Your CPA and attorney should handle that allocation.
• Timing. The 1031 clock starts when the real estate sale closes. If the business sale and building sale happen together, plan the exchange early.
• Who owns the building. If an LLC or corporation holds title, that entity usually has to be the buyer in the exchange.

Is a DST a fit for a business owner?

Sometimes. DSTs aren't right for everyone, and suitability is decided case by case. Business sale proceeds often need to fund retirement, so liquidity matters a lot here.

Investor situations at a glance

Here is a summary of the situations above. Every row is general. Your own facts decide the answer.

Who usually isn't a fit for a DST?

I'm most cautious about DSTs in these situations.

• You might need the money within several years. DSTs are illiquid, and there's usually no way out until the sponsor sells.
• You like running property. If you can add value by managing, leasing and improving, a DST takes that away.
• Your gain is small. If the deferred tax is modest, the fees and illiquidity may cost more than the tax.
• You aren't accredited. Most DSTs aren't open to you.
• You want to refinance or pull cash out later. A DST can't do that for you.
• This would be most of your net worth. Concentrating most of your wealth in illiquid real estate is a lot of risk.
• You have a strong view on a local market. A direct purchase where you have an edge may suit you more.
• You're uncomfortable trusting a sponsor. Your results depend on someone else's decisions and conflicts of interest.

Is a DST right for me? How to decide, step by step

Here's how I'd work through the question. You can start on your own, but the last steps need professionals.

Step 1: Write down your goal in one sentence

"I want to stop managing my rentals and keep my gain deferred" is clear. "I want more income" is too vague, and a DST may not be the answer.

Step 2: Estimate your gain and your tax

Ask your CPA for a rough estimate of the tax on a taxable sale. If the number is small, a DST's costs may outweigh the benefit.

Step 3: Check your liquidity

Add up the money you could reach within a few weeks, outside the sale proceeds. Ask whether it covers several years of needs and emergencies. If not, consider keeping part of the sale in cash.

Step 4: Confirm your eligibility

Check whether you, or the entity selling, meet an accredited investor test. Make sure the buyer in the exchange matches the seller.

Step 5: Compare the alternatives

Line up the options: pay the tax, hire a manager, buy a direct property, an installment sale, or DSTs. Compare each on tax, workload, control and liquidity.

Step 6: Read the risks

Read my guide on DST risks and the risk factors in any offering's private placement memorandum. If the risks would keep you up at night, that's an answer.

Step 7: Talk it through with professionals

Have your CPA, attorney and qualified intermediary review the plan. If you're still considering a DST, my guide on how to invest in a DST walks through the process from first call to closing.

Mistakes to avoid when deciding if a DST is for you

1. Deciding based on age alone. Being retired doesn't make a DST right, and being younger doesn't rule it out. Your liquidity, goals and gain decide it.
2. Exchanging everything by default. A partial exchange can leave you with cash you may need. Weigh the tax cost against the flexibility.
3. Counting on distributions to pay the bills. Distributions are not guaranteed. Build a budget that works if they drop.
4. Ignoring how small your gain is. Inherited property or a recently bought rental may have little gain. Fees can outweigh the deferral.
5. Putting leveraged DSTs in an IRA without a tax review. Debt-financed income can create a filing and tax for the IRA.
6. Forgetting the state you left. Your old state may still track the deferred gain.
7. Splitting a small exchange too thin. More DSTs aren't automatically better. Each one adds paperwork and its own fees.
8. Assuming a large exchange can name unlimited properties. The identification rules cap what you can list.
9. Confusing eligibility with suitability. Being accredited makes you eligible. It doesn't make any one DST right for you.
10. Skipping your heirs. If they'll inherit DST interests, they inherit the illiquidity too. Talk with them and your estate attorney.

Risks to weigh before you invest

Every situation above shares the same core risks. DST interests are speculative, illiquid securities.

• Loss of principal. You can lose some or all of your investment.
• Distributions are not guaranteed. They can be reduced or stopped.
• Illiquidity. There's no public market, and you should plan to hold for the full term or longer.
• Limited control. You have no say in leasing, financing, management or sale timing.
• Reliance on the sponsor. The sponsor's decisions, finances and conflicts of interest affect your results.
• Fees. Up-front and ongoing fees reduce your returns.
• Leverage. Debt magnifies losses and can create a forced sale at a bad time.
• Tax risk. If the trust or your exchange doesn't follow the rules, you could owe tax. Tax laws, including the step-up in basis, can change.

How I help investors decide

My background is in real estate acquisitions, management and development. I 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 starts with an introductory call. We talk about your sale, your goals, your timeline and your other assets. Sometimes the right answer is a direct property, a partial exchange or paying the tax. I'd rather say that early.

If a DST may fit, we review opportunities together. I walk you through the offerings I currently have available, and I tell you why I'm considering each one, what I like, and where I have reservations. Then my team coordinates the paperwork with the sponsor and your qualified intermediary.

Before any offering reaches you, my team and I review it across five areas, with outside auditors in each: broker-dealer review, investment manager audit, investment offering review, real estate assessment and institutional underwriting. That review is continuous. I offer DSTs from more than 20 institutional sponsors, and I track more than 1,100 full-cycle 1031 DST investments for performance.

Securities are offered through Aurora Securities, Inc., member FINRA/SIPC. Baker 1031 Investments is independent of Aurora.

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.

Smaller exchanges have room

One number stands out for smaller exchanges: 21 of 76 offerings (28%) start at $25,000. The median minimum is $100,000, and minimums range from $25,000 to $500,000.

For an exchange under $500,000, that range means splitting across two or three DSTs is often possible. For a large exchange, it means minimums rarely limit how you divide the money.

Nearly half use no debt

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

This matters in two of the situations above. For IRA money, all-cash offerings generally avoid the debt-financed income issue. For large exchanges with a big mortgage to replace, the leveraged offerings are where debt credit comes from.

Holds are long, which matters for retirees

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. If you're 75, a 10-year hold is a real planning question for you and your heirs.

Locations span 33 states

The offerings in my records sit in 33 states. The most common are Florida (14), Texas (13), North Carolina (8) and Georgia (7). For out-of-state owners, that spread is part of the appeal. It also means more possible state tax filings.

Property types

Multifamily leads with 31 offerings (41%), then industrial with 18 (24%) and net lease with 15 (20%, including energy royalty programs). There are also 5 self-storage, 4 retail and 3 medical office offerings. Spreading across types is one way large and mid-sized exchanges reduce reliance on one market, though it doesn't protect against loss.

Exit terms differ

On exits, 44 offerings (58%) have an optional 721 exit into a REIT, 13 (17%) make it mandatory, 17 (22%) offer none, and 2 are unclear. A 721 exit converts your DST interest into REIT operating partnership units, which can't be exchanged again under Section 1031. If you're a younger investor who may want more exchanges, that matters.

Frequently asked questions

Who should invest in a DST?

There's no single type of person who should. DSTs often come up for accredited investors selling rental property who want to stop managing it and keep deferring tax. DSTs aren't right for everyone, and suitability is decided case by case based on your goals, liquidity and tax picture.

I'm tired of being a landlord. How do I get out without a big tax bill?

Common options include a 1031 exchange into easier-to-own property or DSTs, an installment sale that spreads the gain over years, or holding the property until death. Each has trade-offs in control, liquidity and risk. Your CPA can estimate the tax under each option.

Is a 1031 exchange a good idea for retirees?

It can be, because it defers tax and, with a DST, can remove management work. But retirees should weigh liquidity carefully, since DST money is usually locked up for years. A partial exchange that keeps some cash available is worth considering.

Can a DST provide retirement income?

Many DSTs pay distributions from rental income, but distributions are not guaranteed and can be reduced or stopped. A DST shouldn't be the only source you count on for living expenses. Plan as if the payments could drop for a while.

Are DSTs worth it for a small 1031 exchange?

Sometimes. Many offerings start at $25,000, so smaller exchanges can be split across a few DSTs. But fees take the same share of a small investment, and if your gain is modest, paying the tax may be simpler.

Can I use my IRA to invest in a DST?

Sometimes, through a self-directed IRA, if the offering accepts IRA money. An IRA doesn't need a 1031 exchange, and a leveraged DST can create taxable debt-financed income for the IRA. Talk with your CPA and custodian first.

Can I invest in a DST without doing a 1031 exchange?

Often, yes, if you meet the investor requirements and the offering accepts cash. You won't defer any tax on the way in. Without that benefit, the fees and illiquidity weigh more heavily, so compare it with other real estate options.

Is a DST a good option if I live in a different state from my rental?

It can remove long-distance management, and DSTs own property across many states. You may have to file nonresident returns where the DST owns property. Your old state, such as California, may keep tracking the deferred gain.

Should an accidental landlord do a 1031 exchange into a DST?

It depends mostly on the size of the gain and how long you can hold. A former home may qualify for the home sale exclusion, and inherited property usually gets a stepped-up basis, so your taxable gain may be smaller than you think. If it is, a DST's fees and illiquidity may cost more than the tax you'd defer.

Who should not invest in a DST?

People who may need the money within several years, who want control, who have a small gain, or who aren't accredited. It's also a concern if the DST would be most of your net worth. In those cases, other options often fit better.

What should I do with inherited rental property?

Inherited property usually gets a stepped-up basis, so your gain may be small if you sell soon. That makes a DST's fees and illiquidity harder to justify. Ask your CPA to estimate the gain before choosing.

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 U.S.C. § 1014, Basis of property acquired from a decedent (Cornell LII)
• 26 U.S.C. § 453, Installment method (Cornell LII)
• 26 U.S.C. § 512, Unrelated business taxable income (Cornell LII)
• 26 U.S.C. § 514, Unrelated debt-financed income (Cornell LII)
• 26 U.S.C. § 4975, Tax on prohibited transactions (Cornell LII)
• IRS Revenue Ruling 2004-86
• IRS Publication 598, Tax on Unrelated Business Income of Exempt Organizations
• IRS, Retirement Plan Investments FAQs
• California Franchise Tax Board, 2025 Instructions for Form FTB 3840
• Investor.gov, Updated Investor Bulletin: Accredited Investors
• Investor.gov, Private Placements under Regulation D, Investor Bulletin
• FINRA, Investor Alert: Self-Directed IRAs and the Risk of Fraud
• FINRA Regulatory Notice 23-08
• FINRA (NASD) Notice to Members 05-18